IMF Says Increasing Vaccine Spending Fastest Way To Consolidate Public Finances
The COVID-19 pandemic will continue to inflate global public debt in 2021, but spending more money to speed up vaccinations is the fastest way to start normalizing public finances, the International Monetary Fund said on Wednesday.
The IMF said in its 2021 Fiscal Monitor report that if faster global vaccinations brought the virus under control earlier, more than $ 1,000 billion in additional global tax revenue could be collected through 2025 in advanced economies. If that same upward scenario in the Fund’s economic forecast materializes, global GDP output could increase by $ 9 trillion over the same period as companies reopen and hire faster, the IMF said.
“The vaccination will therefore be more than cost effective, offering excellent value for the public money invested in accelerating the production and global distribution of vaccines,” the IMF said in the report. The IMF and the World Bank, in their spring virtual meetings this week, urge member countries to maintain budget support to their economies and vulnerable citizens and businesses until the pandemic is firmly under control.
The Fund estimated that governments have deployed some $ 16 trillion in budget support related to the pandemic from the onset of the pandemic until March 17 of this year. This includes $ 10 trillion in additional spending and lost revenue, and $ 6 trillion in government loans, guarantees and capital injections for businesses. In 2021, the Fund predicts that budget deficits will decline slightly in most countries as pandemic-related support expires or ends, jobless claims decline, and incomes begin to recover as businesses continue to recover. reopen.
Average overall budget deficits reached 11.7% of GDP for advanced economies in 2020 – quadruple their share from 2.9% in 2019 – but they are expected to narrow to 10.4% in 2021, the IMF said. Emerging economy deficits will also narrow slightly in 2021 to 7.7% of GDP for emerging market economies and 4.9% for low income economies.
Average global public debt is expected to reach a record 99% of GDP in 2021 and stabilize at this level after increasing slightly from 97% in 2020. For advanced economies, debt will peak at 122.5% in 2021, up from 120 , 1% by 2020 The IMF has called for more targeted support for vulnerable households, including minorities, women and workers in low-paid jobs in the informal sectors in many economies. More targeted support for small businesses was also needed, he said.
But he said some advanced countries with high debt levels might need to start rebuilding fiscal cushions to prepare for future shocks. He said these countries should develop multi-year frameworks to increase income and streamline spending, prioritizing investments to tackle climate change and reduce economic inequalities. In a chapter of the Fiscal Monitor released last week, the IMF said advanced economies could use more progressive income taxes, inheritance and property taxes, and taxes on “excess” corporate profits to help to reduce the inequalities exposed by the COVID-19 pandemic.
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