WASHINGTON, Oct. 14 (Xinhua) -- The International Monetary Fund (IMF) on Wednesday said fiscal support in response to the COVID-19 pandemic has been costly, and many countries will need to do more with their increasingly tight budgets.
According to the newly released October 2020 Fiscal Monitor report, governments worldwide have taken forceful measures to cushion the blow of the pandemic, with fiscal policies totaling a staggering 12 trillion dollars globally.
Noting that these lifelines have saved both lives and livelihoods, Vitor Gaspar, director of the IMF's fiscal affairs department and his colleagues wrote in a blog post that these fiscal measures are also "costly."
Such measures, together with sharp falls in tax revenues owing to the recession, have pushed global public debt to an all-time high of close to 100 percent of Gross Domestic Product (GDP), according to the report.
As economies gradually reopen amid uncertainty about the course of the pandemic, governments should ensure that fiscal support is not withdrawn too rapidly, the IMF official noted.
"With many workers still unemployed, small businesses struggling, and 80-90 million people likely to fall into extreme poverty in 2020 as a result of the pandemic -- even after additional social assistance -- it is too early for governments to remove the exceptional support," Gaspar said.
However, he said, it should become more "selective" and avoid standing in the way of necessary sectoral reallocations as activity resumes, noting that support should shift gradually from protecting old jobs to getting people back to work, as well as helping viable but still-vulnerable firms to safely reopen.
With low interest rates and high unemployment, boosting public investment -- starting with maintenance and ramping up projects -- can create jobs and spur economic growth, according to the Fiscal Monitor report.
"Emerging market and low-income economies facing tight financing constraints will need to deliver more with less, by re-prioritizing spending and enhancing its efficiency," Gaspar said, adding that some may need further official financial support and debt relief.
Once the pandemic is under control, governments will need to foster the recovery while addressing the legacies of the crisis -- including the large fiscal deficits and high public debt levels, he noted.
Looking ahead, countries will need to make it a priority to invest in healthcare systems and education, and strengthen their social safety nets, the IMF official said.
As economies begin to recover, governments should seize this moment to move away from the pre-crisis growth model and accelerate the transition to a low-carbon and digital economy, he added. Enditem
