IMF says Britain does not need to speed up fiscal consolidation
IMF says Britain does not need to speed up fiscal consolidation
By David Milliken Wed, October 14, 2026 at 5:50 AM UTC
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By David Milliken BANGKOK, Oct 14 (Reuters) - Britain's government does not need to accelerate the pace of fiscal consolidation to reduce its budget deficit given it has already taken decisive action,
By David Milliken
BANGKOK, Oct 14 (Reuters) - Britain's government does not need to accelerate the pace of fiscal consolidation to reduce its budget deficit given it has already taken decisive action, top International Monetary Fund officials said on Wednesday.
"Our recommendation is 'stay the course'. We are not saying 'accelerate the pace of consolidation'," fiscal affairs director Rodrigo Valdes said during IMF-World Bank meetings in Bangkok.
The IMF has drawn a contrast between Britain and other big economies that have little or no plans to reduce borrowing at a time of rising interest rates, in a boost for finance minister John Healey, who arrives at the meetings on Wednesday.
"The UK is actually one country where action to reduce debt and deficit has been taken decisively," IMF Managing Director Kristalina Georgieva told a press conference.
Despite lower debt levels than most of the largest advanced economies, British government borrowing costs are the highest in the Group of Seven and last week touched their highest since 1998 as part of a global bond selloff.
The British government, which ran a budget deficit of 4.4% of GDP last year, aims to balance day-to-day non-investment spending with tax revenue by the 2029/30 financial year – but previous governments regularly failed to meet similar goals.
MARKETS SHOW 'A BIT MORE SENSITIVITY' TO UK BORROWING
Georgieva acknowledged that markets showed "a bit more sensitivity" to British government borrowing.
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Former Prime Minister Liz Truss triggered a British bond market panic during her short time in office in 2022 when she declined to take advice from the country's budget watchdog and set out plans for tax cuts and energy subsidies at a time of surging inflation.
Healey will deliver his first annual budget on October 28. He faces extra spending demands from higher debt interest costs and pressures to spend more on defence and energy subsidies, as well as rising welfare costs.
British foreign minister Ed Miliband, speaking at a World Bank event in Bangkok, said Britain and other countries were "in a world of constrained fiscal space".
IMF SAYS DISCUSSION ON SPENDING PRIORITIES 'VERY URGENT'
Asked if Britain should raise taxes or cut other areas of spending to fund defence, the IMF's Valdes said many European countries faced similar challenges.
"In general ... the space for a lot more revenue, it's not easy. It distorts at the end of the day. So the discussion about the social contract behind spending is very, very urgent," he said.
British tax revenue as a share of gross domestic product is close to its highest since just after World War Two, although it is lower than in other European countries with more generous public pensions and welfare systems.
The Financial Times reported on Wednesday that Healey would ensure that any new spending measures such as temporary energy subsidies in this month's budget were funded in a way that would not lead to extra borrowing at the 2029/30 horizon, the government's target for a balanced current budget.
(Reporting by David Milliken; additional reporting by David Lawder; Editing by Martin Petty and John Mair)
Source: “AOL Money”
