ANKARA: The International Monetary Fund (IMF) on Wednesday said that uncertainty on fiscal outlooks is “unusually high,” adding the longer the pandemic lasts, the greater the challenge for public finances will be.
“At present, the evolution of Covid-19 and its fallout on economic and social developments remain highly uncertain,” the IMF said in the Financial Monitoring Report for April 2021 published under the theme of ‘A Fair Shot.’
The report urged governments to keep policies agile and respond flexibly as the pandemic situation may require.
It said the balance between supporting people and firms, in the emergency, and facilitating a resilient, sustainable, and inclusive growth through economic transformation should evolve and adapt to the evolution of Covid-19.
According to the IMF, the pandemic is leaving behind complex legacies that will need to be tackled.
The first thing, the IMF explained, is that the amount of fiscal support in 2020 was much larger than the historical norm for business cycle fluctuations.
“That was appropriate because Covid-19 is a health emergency but these measures were expensive and contributed to reaching historically high debt levels,” it stressed.
It suggested that rebuilding buffers and dealing with legacies is crucial for resilience in the event of further shocks.
“Medium-term frameworks and better targeting will be key for building fiscal space and better confronting trade-offs such as providing support now and providing insurance against future emergencies.”
Pointing out that countries are in different stages of Covid-19, the IMF said economic and labor market conditions differ and structural characteristics – including institutions – are distinct.
Thus, fiscal policy must be tailored to country-specific circumstances, it added.
It also underlined the race to vaccinate against Covid-19 continues, but the pace of inoculations is widely different across countries, with access unavailable for many.
“If progress in vaccination is accelerated to reach everyone, the health, economic, and social benefits would be enormous,” the report added.