WASHINGTON, Oct. 13 (Xinhua) -- The COVID-19 pandemic will leave a lasting mark on inequality, poverty, and government finances, the International Monetary Fund (IMF) said in its Fiscal Monitor released Wednesday, cautioning against a great financing divide.
Global debt, which includes both public and non-financial private sector debt, jumped by 14 percent to a record high of 226 trillion U.S. dollars in 2020 as policymakers responded to the pandemic, and public debt now amounts to 88 trillion dollars, close to 100 percent of global gross domestic product (GDP), according to the report.
In 2021 and 2022, public debt is expected to decline by about 1 percentage point of GDP each year; after that, it should stabilize at about 97 percent of GDP, the report showed.
In advanced economies, fiscal policy remains supportive of economic activity and employment, while in emerging markets and low-income developing countries, fiscal support -- already more limited than in advanced economies -- "is waning further due to tightening financing constraints," wrote Vitor Gaspar, director of the IMF's Fiscal Affairs Department, and his colleagues in a blog on Wednesday.
"By 2024, they would still be significantly below our projections pre-COVID-19 and the same is true for their revenues," Gaspar told Xinhua in a remote interview earlier this week. "In the case of low-income developing countries, there is a very persistent financing gap."
The IMF urged policymakers to calibrate policies to the pandemic and to economic developments and prospects, prioritize transformation to make economies smarter, greener, and more resilient and inclusive, gradually increase tax revenues where necessary and improve spending efficiency.
It also encouraged countries to strengthen the credibility of fiscal policy to create room for further support in the short term without jeopardizing public credit.
Noting that strengthening the credibility of fiscal policy is "extremely important," Gaspar said countries that benefit from credible medium term fiscal frameworks "are able to manage their trade-offs better."
In light of the great financing divide, the IMF official said the multilateral lender's rapid financing facilities have made a difference in the countries where they were needed the most, and the largest Special Drawing Rights (SDR) allocation in history makes liquidity available to vulnerable countries.
"But we believe that more is needed," Gaspar told Xinhua. "And in particular voluntary channeling of SDRs by countries that have a comfortable external position (to low-income developing countries)."
The Fiscal Monitor also noted that with the expiration of the Group of Twenty (G20) Debt Service Suspension Initiative at the end of 2021, ensuring the effective functioning of the G20 Common Framework to provide debt relief will be "essential" to helping the world's poorest and most heavily indebted countries cope with the continuing fallout of the COVID-19 crisis. Enditem