Decisive government actions are necessary to ensure swift and extensive vaccine rollout, protect the most vulnerable households and otherwise viable firms, and foster a durable and inclusive recovery, the International Monetary Fund (IMF) said.
"The Covid-19 pandemic is accelerating in many countries and uncertainty is unusually high," Vitor Gaspar, director of the IMF's Fiscal Affairs Department, and his three colleagues wrote in a blog published on Thursday. "Global cooperation on producing and widely distributing treatments and vaccines to all countries at low cost is crucial," Gaspar said.
"The sooner the global pandemic ends, the quicker economies can return to normal and people will need less government support." According to the Fiscal Monitor update, global fiscal support reached nearly $14 trillion as of end December 2020, up by about $2.2 trillion since October 2020. "Covid-19 was an enormous disturbance to all countries around the world. Tax revenues have shrunk quite substantially," Gaspar told Xinhua, calling such fast and strong fiscal actions "absolutely necessary" to help contain the pandemic and to avoid a financial crisis.
Together with economic contraction that has resulted in lower revenues, such support has led to a rise in public debt and deficits, according to the IMF report. Average public debt worldwide approached 98 percent of gross domestic product (GDP) at the end of 2020, compared with 84 per cent projected pre-pandemic for the same date.
When asked whether policymakers should be concerned about the ballooning public debt, Gaspar told Xinhua one has always to be concerned about proper management of public finance risks, and to bear in mind public debt sustainability, but at this point in time, "the very first priority is to defeat the pandemic". Gaspar urged policymakers to strike a "balance" between providing more short-term support to ensure a solid recovery and keeping debt at a manageable level over the longer term.
The blog also noted that in low-income countries, the fiscal policy response has been more limited, owing to financing constraints and less developed welfare programs, adding that the pandemic thus risks leaving "a lasting impact" in these countries. They will need additional assistance, including through grants, concessional financing, an extension of the G20 debt service suspension initiative, or, in some cases, debt restructuring, according to the report. "Governments need to win the vaccination race, respond flexibly to the changing economic conditions, and set the stage for a greener, fairer, and more durable recovery," Gaspar said.
