You are here: Home » International » News » Economy
Business Standard

IMF tells Britain to keep spending to fend off coronavirus crisis

IMF staff said increases in the rate and scope of major taxes would be almost inevitable.

Topics
International Monetary Fund | Coronavirus | Britain

Reuters 

IMF
Sunak welcomed the IMF report, which he said endorsed his economic policies and his warnings that there would need to be action in future to reduce borrowing.

can afford to ramp up its already massive spending push to counter the effects of the pandemic on the economy, the head of the Monetary Fund said on Thursday.

The British government should increase public investment and bolster its welfare support for people who lose their jobs because of the crisis, said Kristalina Georgieva, the IMF's managing director.

It should also continue supporting companies and protecting workers until the economic hit eases, Georgieva said at the end

of a review of Britain's by the Fund.

"My main message today is that continued policy support is essential to address the pandemic and to sustain and invigorate

a recovery," Georgieva said in an online presentation alongside British finance minister Rishi Sunak.

"We welcome that the authorities have committed to deliver it as long as necessary to boost expectations and confidence. The policy space exists to do this," she said.

The IMF has estimated that is on course to rack up a budget deficit of 16.5% of gross domestic product this year, dwarfing the damage wrought on the country's public finances by the global financial crisis.

Georgieva said fixing the public finances could not be ignored but should only happen "once the private sector has durably picked up steam."

IMF staff said increases in the rate and scope of major taxes would be almost inevitable.

Sunak welcomed the IMF report, which he said endorsed his economic policies and his warnings that there would need to be

action in future to reduce borrowing.

"Let me be clear on what the Fund is saying today. It's right to support the in the short term, but over time, - and in line with other major economies - we must get our public finances back on a sustainable path," he said

The IMF released more pessimistic forecasts for the British which it now saw contracting by 10.4% in 2020 and then

growing by 5.7% in 2021, down from estimates published just a few weeks ago.

Georgieva said the Bank of England should continue to keep monetary policy accommodative because of the "significant risk"

that would come in weaker than its 2% target.

"This can be done by scaling up government bond purchases. Other tools like negative rates can be brought in after further

understanding is developed on when they would be most useful in the UK context," she said.

The BoE is widely expected to expand its bond-buying programme next week while it looks into the feasibility of

taking its benchmark lending rate - currently at 0.1% - below zero for the first time.

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Thu, October 29 2020. 21:18 IST
RECOMMENDED FOR YOU
.