The State of Public Finances: A Cross-Country Fiscal Monitor

By Paolo Mauro, Mark A Horton, Manmohan S. Kumar

July 30, 2009

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Paolo Mauro, Mark A Horton, and Manmohan S. Kumar The State of Public Finances: A Cross-Country Fiscal Monitor, (USA: International Monetary Fund, 2009) accessed September 20, 2024

Summary

This paper presents sharp increase in government debt has complicated the management of preexisting challenges from population aging, especially in advanced economies. The increase in debt ratios projected for these economies is the largest since World War II. The increase in deficits and debt raises complicated tradeoffs. Policymakers will need to balance two competing risks: on the one hand, a too hasty withdrawal of fiscal stimulus would risk nipping a recovery in the bud; on the other hand, with a delayed withdrawal investor concerns about sustainability may increase, leading to higher interest rates on government paper, undermining the recovery and increasing risks of a snowballing of debt. Regardless of the timing of adjustment, its necessary scale will be quite large, particularly for high-debt advanced economies. Preserving investor confidence in government solvency is key to avoiding an increase in interest rates, thereby not only preventing snowballing debt dynamics, but also ensuring that the fiscal stimulus is effective.

Subject: Emerging and frontier financial markets, Expenditure, Financial markets, Fiscal policy, Fiscal stance, Fiscal stimulus, Public debt

Keywords: Africa, Ameliorating spending dynamics, Country, Country authorities, Country circumstances, Emerging and frontier financial markets, Emerging G-20 country, Europe, Financial support, Fiscal stance, Fiscal stimulus, Fund G-20 desk, G20 industrial nations, GDP, GDP ratio, Global, Government financing, Interest rate, Market G-20 country, PPP GDP-weighted average, SPN, Stimulus spending

Publication Details

Pages:

33
Volume:

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DOI:

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Issue:

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Series:

Staff Position Note No. 2009/021
Stock No:

SPNEA2009021
ISBN:

9781455257270
ISSN:

2617-6742

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