The International Monetary Fund (IMF) has urged central banks and financial institutions across the globe to ignore the prospect of rising debts and continue public funding to complete the economic recovery from the COVID-19 induced slowdown.
The global monetary organization which has been a long time proponent of budget constraints and reduced public spending warned about the “unprecedented jump” in government debts which could occur but remarked it as “not the most immediate risk”. The Fund advised nations to focus more on avoiding premature withdrawal of support.
IMF’s virtual annual meet saw views from the like of European Central Bank chief Christine Lagarde who shared her concern about financial aid to workers and businesses getting phased out too soon.
Meanwhile, her American counterpart Jerome Powell, the chair of the US Federal Reserve is fighting his own battle at the country’s policymaker citing the limitations of the central bank to correct these unprecedented issues with any set of monetary policies including bond-buying.
Both leaders of their respective powerful apex banks have made it clear that any form of reform will have to be driven through government spending.
IMF predicts that governments across the globe have already infused close to $12 trillion towards various stimulus packages. The organization expects the global public debt to pass 100 percent of GDP for the first time in 2022.
Jose Vinals, Standard Chartered’s Chairman observed that “You cannot prematurely withdraw any of this policy support, but you can only do it as circumstances improve.” further emphasizing that “A lot of fiscal support will still be needed, next year as well, and perhaps beyond that.”