Governments tend to increase public spending during election years, and 2024 is shaping up to be a significant election year with a record number of countries going to the polls. The International Monetary Fund (IMF) is concerned about the potential increase in deficits during this time when public finances are already strained and is urging governments to practice fiscal moderation. The IMF is recommending measures such as taxing excessive corporate profits, reforming healthcare and pension spending, and removing crisis-era fiscal policies.
The IMF is particularly worried about the impact of the pandemic and recent inflation on public finances. Fiscal deficits and debts are higher than pre-pandemic levels, and increased interest rates have raised interest expenses. Support measures enacted in response to the pandemic have also led to higher social benefits, subsidies, and transfers. With the added pressure of election year spending, the IMF is cautioning against fiscal slippage and calling for responsible fiscal policies.
The IMF’s Fiscal Monitor report emphasizes the need for governments to address structural challenges and contain spending pressures, especially in advanced economies with aging populations. The report suggests measures to increase tax revenue potential and generate additional funds for government budgets. Without significant new measures, global public debt is expected to rise, especially in countries like China and the United States, where large deficits are projected.
In Europe, countries like France and Italy are facing worrying fiscal trajectories with high deficits, low growth, and rising debt levels. The IMF forecasts deficits and debt increases in these countries, along with recommendations for fiscal reforms. Germany is expected to have balanced accounts and reduced debt levels, while Spain’s deficit is projected to remain stable with a slight decrease in debt levels. Overall, the IMF is urging governments to adopt responsible fiscal policies to address current challenges and ensure long-term financial stability.