Exercise fiscal restraint to preserve sound public finances in this ‘great election year’ — IMF to governments

The International Monetary Fund (IMF) is calling on governments around the world to exercise fiscal restraint in 2024, which they say is on track to be the biggest election year ever recorded globally.

In an analysis piece published on its portal on April 17, IMF economists Era Dabla-Norris, Vitor Gaspar, Marcos Poplawski-Ribeiro, and Jiae Yoo warn that with national elections being held in over half of the world this year, maintaining budget discipline will be crucial.

“History shows governments tend to spend more and tax less during election years. Deficits in election years tend to exceed forecasts by 0.4 percentage points of GDP, compared to non-election years,” the IMF officials wrote.

“In this great election year, governments should exercise fiscal restraint to preserve sound public finances,” warned the IMF.

The IMF is urging leaders to avoid slipping on fiscal consolidation efforts and focus on strengthening their finances over the medium term.

While global debt levels have stabilized after ballooning during the pandemic, many countries still face sizable budget deficits and rising debt burdens that require ongoing fiscal adjustment.

According to the analysis, one-third of advanced and emerging economies will have primary deficits exceeding sustainable levels by 2029 if current policies do not change.

The analysts emphasize that without more action, “the return of fiscal policy to its prepandemic normal may take years” given new spending pressures.

The IMF stressed that, “Countries need decisive efforts to safeguard sustainable public finances and rebuild fiscal buffers.”