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  • Forecasts of Budgets, Deficits, and Debt x
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International Monetary Fund
This paper highlights the state of Public Finances Cross-Country Fiscal Monitor. This edition of the Cross-Country Fiscal Monitor provides an update of global fiscal developments and policy strategies, based on projections from the November 2009 WEO. These projections reflect the assessment of IMF staff of current country policies and initiatives expected during 2009–2014 Underlying fiscal trends in advanced economies are weaker than previously projected, however, lower expected costs of financial sector support in the United States mean that 2009 headline numbers are better. New estimates of needed medium-term fiscal adjustment in advanced economies. Fiscal policy will continue to provide substantial support to aggregate demand in most countries this year, but a tightening is projected to commence next year in G-20 emerging markets. Fiscal policy is projected to begin tightening in emerging G-20 economies next year, reflecting a combination of reduced anti-crisis spending and expected consolidation beyond the withdrawal of crisis-related stimulus in Brazil, Mexico, and Turkey, supported by a pick-up of growth. Higher commodity prices are also expected to contribute to lower overall deficit.
Mr. Carlo Cottarelli and José Vinãls
In response to the worst economic crisis since the 1930s, government budgets and central banks have provided substantial support for aggregate demand and for the financial sector. In the process, fiscal balances have deteriorated, government liabilities and central bank balance sheets have been expanded, and risks of future losses for the public sector have increased.
Mr. Paolo Mauro, Mr. Mark A Horton, and Mr. Manmohan S. Kumar
This paper presents sharp increase in government debt has complicated the management of preexisting challenges from population aging, especially in advanced economies. The increase in debt ratios projected for these economies is the largest since World War II. The increase in deficits and debt raises complicated tradeoffs. Policymakers will need to balance two competing risks: on the one hand, a too hasty withdrawal of fiscal stimulus would risk nipping a recovery in the bud; on the other hand, with a delayed withdrawal investor concerns about sustainability may increase, leading to higher interest rates on government paper, undermining the recovery and increasing risks of a snowballing of debt. Regardless of the timing of adjustment, its necessary scale will be quite large, particularly for high-debt advanced economies. Preserving investor confidence in government solvency is key to avoiding an increase in interest rates, thereby not only preventing snowballing debt dynamics, but also ensuring that the fiscal stimulus is effective.
International Monetary Fund
This paper discusses appropriate methods for disclosing fiscal risks from exogenous shocks and the realization of explicit or implicit contingent obligations of the government. Expanding on previous guidance prepared prior to the crisis, the note focuses on fiscal risks emerging from recent public interventions in the financial sector. Information on fiscal risks and its public reporting leads to a better understanding of the true state of the public finances. Thus, it helps policymakers design and gets public support for, appropriate responses to the realization of various contingencies. More specifically, in the context of the unfolding global financial crisis, a wide range of public sector interventions have been in support of the financial system. Although these interventions have been necessary, they have generated further fiscal risks. Comprehensive reporting would help governments to define a management strategy of the assets and liabilities that they have taken on their balance sheet and to prepare exit strategies for reducing their presence in the financial sector and eventually withdrawing support.