IMF says higher vaccine spending is fastest way to prop up public finances By Reuters

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© Reuters. FILE PHOTO: Coronavirus Disease (COVID-19) Vaccination Center in Bobigny

By David Lawder WASHINGTON (Reuters) – The COVID-19 pandemic will continue to increase global public debt in 2021, but spending more money to speed up vaccines is the fastest way to start normalizing government finances, the Fund said on Wednesday. International Monetary. The IMF said in its 2021 Fiscal Monitor report that if faster global vaccines control the virus sooner, more than $ 1 trillion in additional global tax revenue could be raised through 2025 in advanced economies. If that same bullish scenario in the Fund’s economic forecasts materializes, world GDP output could rise by $ 9 trillion during the same period when companies reopen and hire more quickly, the IMF said. “Thus, vaccination will more than pay for itself, providing excellent value for money for the public money invested in increasing global vaccine production and distribution,” the IMF said in the report. The IMF and World Bank, during their virtual spring meetings this week, urge member countries to maintain fiscal support for their economies and vulnerable citizens and businesses until the pandemic is firmly under control. The Fund estimated that governments have invested some $ 16 trillion in pandemic-related fiscal support since the pandemic began until March 17 of this year. That includes $ 10 trillion of additional expenses and foregone income, and $ 6 trillion in government loans, guarantees and capital injections for businesses. In 2021, the Fund projects that fiscal deficits will narrow slightly in most countries as support related to the pandemic expires or wanes, jobless claims drop, and revenues begin to recover as businesses reopen. Average overall budget deficits reached 11.7% of GDP for advanced economies in 2020, quadrupling their share from 2.9% in 2019, but should be reduced to 10.4% in 2021, the IMF said. Deficits in emerging economies will also contract slightly in 2021 to 7.7% of GDP for emerging market economies and 4.9% for low-income economies. Average global public debt is projected to reach a record 99% of GDP in 2021 and stabilize at that level after rising slightly from 97% in 2020. For advanced economies, debt will peak at 122.5% in 2021, up from 120.1% in 2020 The IMF called for more targeted support for vulnerable households, including minorities, women, and workers in low-paid jobs in informal sectors in many economies. More focused support is also needed for small businesses, he said. But he said some advanced countries with high levels of debt may need to start rebuilding fiscal buffers to prepare for future crises. He said those countries should develop multi-year frameworks to increase revenues and streamline spending, prioritizing investments to combat climate change and reduce economic inequality. 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 “surplus” corporate income taxes to help reduce exposed inequalities for the COVID-19 pandemic.

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