IMF says UK fiscal measures ‘likely to increase inequality’, urges rethink

IMF says UK fiscal measures ‘likely to increase inequality’, urges rethink

By Andrea Shalal

WASHINGTON (Reuters) – The International Monetary Fund on Tuesday targeted Britain’s new fiscal plans that have disrupted markets, warning that “large, untargeted fiscal packages” are likely to increase inequality in Britain and could undermine monetary policy.

In its first comments on new British Finance Minister Kwasi Quarting’s plans, which caused the fall of sterling and bonds, the International Monetary Fund urged British authorities to consider providing more targeted support to families and businesses rather than big tax cuts and sharply increase government spending.

“We are closely monitoring recent economic developments in the UK and working with the authorities,” an International Monetary Fund spokesman said in response to a Reuters query after the British pound hit an all-time low amid growing market concerns.

“Given high inflation pressures in many countries, including the UK, we do not recommend large and untargeted fiscal packages at this stage, as it is important that fiscal policy not operate for purposes that conflict with monetary policy,” the IMF spokesperson said. . The first general reaction.

Kwarteng, who on Friday unveiled a budget aimed at growing the economy by cutting taxes and sharply increasing government borrowing, responded to the chaos in the market by promising to roll out medium-term plans to reduce debt on November 23.

The spokesperson said the global lender understood that Britain’s “big fiscal package” was aimed at helping the population deal with higher energy prices and boost growth through tax cuts and supply measures, but such measures could put fiscal policy at cross purposes with monetary policy.

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“The nature of British measures is likely to increase inequality,” she added.

The spokesperson added that Kwarteng’s November 23 budget will provide “an early opportunity for the UK government to consider ways to provide more targeted support and to re-evaluate tax actions, particularly those that benefit high-income earners”.

Britain was forced to apply for an IMF loan of nearly $4 billion during the 1976 financial crisis, with IMF negotiators insisting on deep cuts in public spending at the time.

International Monetary Fund officials have repeatedly warned in recent months of the need to carefully calibrate fiscal and monetary policy as central bankers raise interest rates around the world to control inflation.

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