## FOREWORD

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### Global outlook and elevated risks
- Global economic prospects have deteriorated, and risks are elevated.
- Uncertainty is unprecedented, and confidence has been weakening.
- Financial markets: exuberance has partially corrected, and financial conditions have tightened.
- Reference: "(April 2025 World Economic Outlook)" is cited as context for how these conditions may test resilience.

### Fiscal policy as part of stability-oriented macroeconomic policy
- Policymakers should invest political capital in building confidence and trust, beginning with keeping their own houses in order.
- Fiscal policy should be part of overall stability-oriented macroeconomic policies.
- Policies should be conducted within sound frameworks and institutions that anchor confidence and expectations.
- It is vital to build political support and gain people’s trust for advancing fiscal and structural reforms.
- Risk noted: without such frameworks, fiscal policy can operate against monetary stability and financial stability.
- Concluding principle: Stability-oriented fiscal policy is an essential building block for keeping one’s own house in order.

### Debt reduction, buffers, and consolidation guidance
- In most countries, fiscal policy should aim at reducing public debt and building buffers to create space to respond to spending pressures and other economic shocks.
- If policy space allows, fiscal consolidation should be measured and gradual.
- Consolidation should be designed carefully to allow countries to protect workers, communities, and businesses—for example, if they are disproportionately affected by surging tariffs and other protectionist measures.
- In emerging market and developing economies, where tax revenues are low, improving the tax system is key.
- Under market pressure, governments may be forced into abrupt and front-loaded adjustments that, in extreme cases, may require timely and orderly debt restructuring.
- Important caveat: country-specific factors and circumstances are crucial everywhere.

### Growth, structural policy, and the fiscal trilemma
- Fiscal policy, together with other structural policies, should aim at improving potential growth to ease policy trade-offs.
- Without improved growth, trade-offs become starker and push governments into painful choices.
- The foreword references a policy trilemma introduced in earlier Fiscal Monitors, created by difficulty in reconciling:
  - first, financial stability and public debt sustainability;
  - second, spending pressures;
  - third, political red lines on taxation.
- Key point: the trilemma becomes less binding when growth improves, underscoring the importance of taking a long view.

### Closing call to finance ministers
- In times of high uncertainty, fiscal policy must be an anchor for confidence and stability that contributes to a competitive economy delivering growth and prosperity for all.
- Ministers of finance must:
  - build trust,
  - tax fairly,
  - spend wisely,
  - take the long view.

*Vitor Gaspar Director Fiscal Affairs Department International Monetary Fund | April 2025ix*

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_Source: https://www.imf.org/-/media/files/publications/fiscal-monitor/2025/english/foreword.pdf_