IMF Calls on Advanced Economies to Cut Public Debt

“Advanced economies must pursue long-term policy reforms to reduce public debt levels over the coming decades and ensure future fiscal sustainability.”

The International Monetary Fund Wednesday has called on advanced economies to cut public debt to ensure fiscal sustainability, Xinhua reported.

“Advanced economies must pursue long-term policy reforms to reduce public debt levels over the coming decades and ensure future fiscal sustainability,” said three papers published by the IMF.

In order to protect the fragile economic recovery, support growth and job creation and provide reassurance to capital markets, fiscal adjustment plans must be clearly defined – but with a focus on the medium term rather seeking a quick fix, the report said.

General government debt in the G20 advanced economies surged from 78 percent of gross domestic product in 2007 to 97 percent of GDP in 2009 and is projected to rise to 115 percent of GDP in 2015, the report said.

“High public debt is due not only to the financial crisis, but also to weak fiscal policy over the preceding decades, when debt levels ratcheted up during hard times but failed to fall in better years,” Carlo Cottarelli, Director of the IMF’s Fiscal Affairs Department said, “The task ahead is all the more complicated because aging societies and global warning are putting additional pressure on public finances.”