The IMF is warning that a ‘synchronized downturn’ in global growth may mean countries need to be prepared for coordinated action, the Fund’s Director of the Fiscal Affairs Department, Vitor Gaspar said at the launch of the Fiscal Monitor report Wednesday in Washington.
Gaspar said that governments must carefully watch their debt burdens, even as new estimates reveal a continued increase.
“The headline number is above 226 percent of global GDP. And that corresponds to a small increase, relative to 2017, when the value was 225 (percent), but a much more expressive increase, relative to what prevailed before the start of the global financial crisis. So, debt levels in the world have continued to increase,” Gaspar said.
A major concern is how to finance sustainable green energy initiatives. The Fiscal Monitor recommend a carbon tax form the centerpiece of efforts to contain climate change.
“If the carbon tax of $75 per ton were implemented globally, China and India would account for almost 70 percent of CO2 reductions among G20 economies, compared with a no‑action scenario.”
Gaspar says that carbon taxes and pricing are an important tool both as an incentive to change energy consumption practices but also to raise income to fund other social goods.
The IMF also noted the importance of developing nations having “full ownership” of their development strategy in order to achieve their Sustainable Development Goals.
“At the heart of achieving these development goals is strong and sustainable inclusive growth. And there, there is really a need for financing, and that is both on the public side and the private side. We have done work on looking at the costing then for countries to achieve their Sustainable Development Goals. And the estimates are around 15 percent of GDP,” said Cathy Pattillo, IMF Fiscal Affairs Department Assistant Director.
Asked to assess China’s fiscal policies, Gaspar called China’s recent fiscal relaxation appropriate.
“The contribution that fiscal policy makes to the rebalancing of the economic growth model of China, especially where, by increasing the purchasing power of consumers, it fosters the move from exports to domestic demand and from investment to consumption, which is part of the transition of the growth model in China.”