On 25 October 2024 the IMF Managing Director, Kristalina Georgieva, spoke at the 2024 Annual Meetings Plenary.

The Managing Director noted that inflation has been falling, from 5.7% in the fourth quarter of 2023, to a projected 5.3% in the current quarter and down to 3.5% in the fourth quarter of 2025. In the advanced economies inflation will fall more quickly. However, the higher price levels resulting from that inflation are causing problems to households globally.

The world is facing a low growth and high debt trajectory, with global GDP projected to grow at an average rate of 3.2% per year over the next five years. On the other hand, global public debt is projected to continue rising. Consequently, higher interest payments will be taking up a significant share of fiscal revenues, especially in low-income and emerging market countries.

Also, there are growing demands on government spending. The priorities include spending related to climate and population ageing, and in emerging market and low-income countries investment that is needed to close development gaps. By 2030, these spending pressures will add around 7% of GDP to annual expenditure in advanced economies, 9% of GDP in emerging markets, and 14% of GDP in low-income developing countries.

Global trade is no longer functioning as a powerful engine of growth. Countries are retreating from global economic integration as a result of national security concerns and discontent from social groups that were left behind by globalisation. There is a large increase in industrial policy measures, trade barriers and protectionism.

Fiscal consolidation should begin at this point where inflation is easing. Plans for consolidation should be accompanied by persuasive communication with the public. Governments should prepare multi-year fiscal plans that set out consolidation paths suited to the conditions within each country.

Domestic revenue mobilization is very important for many countries in the current situation. Growth-enhancing investments are needed notably in climate and technology, and these must be protected. Fiscal consolidation should be designed so that social protection and jobs are not sacrificed.

The managing director noted the example of Jamaica, where the government obtained public backing for a package of revenue and expenditure reforms that protected public investment and social spending. The public debt was almost halved between the years 2012 and 2022. There are also examples from more than twenty countries that have increased their tax revenues by over 5% of GDP in the past three decades.

While pursuing fiscal consolidation, countries must also commence reforms to increase their growth potential. Higher growth can create more employment and can generate higher tax revenues. There must also be labour market measures to ensure skills enhancement and job matching, and measures to cut regulation and mobilize savings. Specific measures are needed to promote innovation and raise productivity. In the advanced economies, venture capital and capital market integration are important priorities. Other economies should focus on measures to improve governance and institutions.

The managing director emphasised the need for cooperation and multilateral action on issues such as debt, to restore debt sustainability. The IMF has prioritized addressing debt vulnerabilities and enhancing debt resolution, and there is enhanced cooperation among stakeholders at the Global Sovereign Debt Roundtable, building consensus on technical issues. The IMF’s regular consultations with member countries cover support for institutional development in fragile and conflict-affected states, capital flow management in emerging market economies, and advice on interest rate policy in advanced economies. The IMF also performs capacity development work, through technical assistance missions to transfer knowledge.