A top International Monetary Fund executive urged poorer nations Friday to reduce government debt “with urgency,” saying they are even more unprepared than rich nations to cope with the economic dangers associated with the aging of their populations, reports the World Bank press review Monday.
Speaking at a conference attended by some of the worlds top economic policymakers, Anne Krueger, the IMFs Deputy Managing Director, said that developed nations enjoyed the good fortune of growing rich before they had to figure out how to pay for the retirement of their workers.
But nations such as China, India, Brazil and Turkey have to make such decisions even as they face “pressing needs” for government spending on infrastructure, education and health. That makes their task much more difficult, Krueger said.
– Even without the prospect of aging, many emerging-market countries are struggling with large fiscal imbalances, she said. – They have large budget deficits. They have large public debt burdens that are not sustainable over time.
– Under the circumstances such nations do not have time to wait until a large share of their populations reach the age of 65. They need to take remedial action now to establish much sounder fiscal positions at a time when the global economic environment is unusually benign, Krueger said.
Brazil and Turkey, she said, have made some progress in reducing debt by achieving budget surpluses. India, by contrast, has continued to rack up giant budget deficits amid plans for much-needed infrastructure spending and increased “social-welfare spending.”
Krueger said economists now widely agree that the “safe” level of debt for emerging-market economies is lower than the levels for industrial economies.
– Yet many countries currently have debt well in excess of the 60 percent limit that the European Union views as the upper limit for its members, and are nonetheless incurring fiscal deficits too large to permit the declines in debt-to-GDP ratios that are needed, added she.
Emerging-market nations, she said, need to change both tax and spending policy – and the IMF and the World Bank are ready to help.
Kilde: www.worldbank.org
