IMF recommends governments reduce deficits and prioritize hunger fight

The IMF (International Monetary Fund) pointed out that global public debt has been falling and should close 2022 at a value similar to that of 91% of the wealth generated on the planet. The number has been decreasing, but remains about 7.5 percentage points higher than before the pandemic.

Despite this, the entity defends that governments continue to prioritize the fight against hunger and, at the same time, be responsible in fiscal management and firm in the fight against inflation.

The Fund released this Wednesday (12) the Fiscal Monitor report. He projects that Brazil should end 2022 with public debt in the range of 88.2% of GDP, and reach 88.9% in 2023. The stock of DPF (Federal Public Debt) in Brazil reached R$ 5.781 trillion in August, most recent data available, according to the Ministry of Economy.

Brazilian debt stood at 60.2% of GDP in 2013, and has been rising steadily over the past decade. In 2020, it hit 98.7%. Since then, it has been retreating. In 2021, it closed at 93%.

Although countries’ debts are high, the Fund recommends that governments continue to take measures to protect the population from crises and guarantee access to employment, income and, especially, food. And that they do so in order to maintain fiscal stability and then reduce their indebtedness levels.

“After decades of reduction, extreme poverty has increased in the world, and it is projected that it will be well above the [nível] pre-pandemic,” said Vitor Gaspar, director of Public Fiscal Affairs at the IMF, during the report’s launch.

“Budgetary and financial resources are scarce, but nutrition and food security must be given priority,” he said.

In addition, the IMF urges countries to work together on solutions to facilitate access to food, fuel and other supplies. And it advocates that taxation be done fairly, including charging more taxes on large profits and incomes.

The entity analyzed the actions taken by more than 170 countries and found a pattern: rich nations took more actions to offset energy costs, and the poorest prioritized ensuring access to food.

In the study, Brazil is cited by the Emergency Aid. “The stabilizing effects of the program far exceeded those of programs that existed before the pandemic,” the document points out. “As a result, the poverty rate and inequality index temporarily dropped in 2020.”

The high indebtedness of countries can generate more inflation, as they carry the risk that governments will need to borrow at higher interest rates, or raise taxes, to obtain money for public spending. These two movements favor the rise of prices.

When investors assess that a country will not be able to fulfill its commitments, they can withdraw money from there, creating a crisis. That’s what happened in the UK recently, after an inconsistently proposed tax cut plan led to a sharp devaluation of the pound. The British government backed off the measure after coming under heavy pressure.

“Markets are looking for certainties in a very uncertain world. This is very difficult to achieve in an uncertain world. It is necessary to conduct policies with flexibility and a lot of humility”, said Gaspar.

This week, the IMF holds its annual spring meetings in Washington and releases several studies. For the Fund, Brazil’s economy should grow this year below the global average, the average for Latin America and the average for developing countries. According to projections, Brazil should see its GDP (gross domestic product) grow by 2.8% in 2022, while the world should register an average growth of 3.2%.

In another report, the entity warned that the risks linked to global financial stability have increased, and that emerging countries, such as Brazil, are more at risk, because lending money abroad has become more difficult. “The global environment is fragile with storm clouds on the horizon,” the Fund said in its Global Financial Stability report, released Tuesday.