Transcript

Fiscal Monitor Press Briefing 2022 Annual Meetings

October 12, 2022

SPEAKERS:

Vitor Gaspar, Director, Fiscal Affairs Department

Paolo Mauro, Deputy Director, Fiscal Affairs Department

Paulo Medas, Division Chief, Fiscal Affairs Department

Nicolas Mombrial, Moderator, Communications Department

Mr. Mombrial: Welcome to the Fiscal Monitor Press Conference “Helping People Bounce Back”. I am Nicolas Mombrial with the IMF Communication Department. I know it is an old tune by now, but it is such a pleasure to finally see you all in person, not just on the screen. I am pleased to have with me today Vitor Gaspar, the Director of the IMF Fiscal Affairs Department; Paolo Mauro, the Deputy Director of the Fiscal Affairs Department; and Paulo Medas, who is Division Chief in the Fiscal Affairs Department. All of them have been working really hard on the Fiscal Monitor. Before we start taking your questions, I am just going to turn to Vitor for some opening remarks, and then we will move to questions. Vitor.

Mr. Gaspar: Thanks, Nico. Thank you, all, for your interest on fiscal developments in the world right now. The global economy is going through turbulent times. The pandemic, inflation, Russia's invasion of Ukraine, and growing debt vulnerabilities are forcing policymakers to face painful tradeoffs. After the unprecedented expansion in 2020, monetary and fiscal policies continue to move together, pivoting towards simultaneous tightening in 2022. Economic recovery, unwinding of pandemic‑related measures, and inflation surprises resulted in debt and deficits falling in 2021 and 2022, but they remain well above their pre‑pandemic levels and projections.

These forces will wane in the future. Most of the unwinding has already taken place, with deficits falling from 9.7 percent of GDP in 2021 to 4.7 percent of GDP in 2022. Inflation surprises helped initially, but this effect cannot endure. Once inflation becomes broad‑based and persistent, inflation expectations catch up. High and volatile inflation makes credit more expensive and its costs less predictable.

In the context of high inflation, high debt, rising interest rates and elevated uncertainty, consistency between monetary and fiscal policy is paramount for economic and financial stability. In most countries, this means staying the budget on its tightening course. Prioritizing macroeconomic and financial stability is especially relevant, as recent developments in bond markets show increased market sensitivity to deteriorating or weak fundamentals. Debt raises the specter of more frequent and widespread fiscal crisis.

High inflation, together with high and surging energy and food prices, combine into a very politically salient cost‑of‑living crisis. In the Fiscal Monitor, we present a survey of 174 countries and the measures taken in the first half of the year. We list about 750 measures. When we look at the country composition of the measures taken, we do see that actions motivated by the energy surge are dominating for advanced economies, but food is relatively much more relevant for developing economies. And that reflects the well‑known fact that food is a much larger share of the budget in countries that have lower GDP per capita.

Now, the most common measures aim at dulling price pass‑through and include reductions in consumption taxes, custom duties, and energy subsidies. Some of these measures have been necessary to face the urgency of the crisis, but most have not been targeted enough, which we find unfortunate. In a world in which available energy resources have shrunk, attempting to maintain domestic demand at levels prior to the energy crisis is not economically viable. Such policy stance does not provide the right incentives to reduce energy demand and expand supply. Moreover, it ends up reducing the energy resources available to countries that cannot afford those measures, a point that is very much emphasized in the Fiscal Monitor.

The price mechanism is effective in allocating scarce energy resources and in providing incentives to find alternative sources of supply. Targeted measures or expanding the existing social safety net can help reconcile the imperative of support for the most vulnerable with the recommended policy mix.

The rise of extreme poverty and food insecurity that began before the pandemic is very concerning. Emergency support is necessary. The food crisis should be addressed at the global level by a broad set of initiatives, including lifting restrictions on food and fertilizer exports. Some emergency financing will be available through the new Food Shock Window under the IMF's emergency financing toolkit. But more is needed, including through rechanneling of wealthier countries' allocations of the IMF's Special Drawing Rights to poorer countries.

At the national level, countries must prioritize food security. In many cases, binding financing constraints make the tradeoffs very painful for countries. Coordinated global action is thus urgent.

Coordinated global action is also urgent for climate transition. If we want to avert a catastrophic outcome, the time to act is now. We look forward to countries coming together to close the ambition and implementation gaps in COP27.

The Managing Director in her curtain raiser speech last week spoke about the fragile and shock‑prone world. The Fiscal Monitor takes a deep dive into how fiscal policy can contribute to a resilient society that is capable of bouncing back in the face of adversity. The pandemic has shown that fiscal measures can be swift and impactful in protecting people and firms when times are tough. Governments have used novel and innovative tools, often leveraging digital technology. These measures can be more efficient if building on a sound preexisting social protection system when crisis strike.

The Fiscal Monitor message is clear. Be prepared. Be prepared for a shock‑prone world. It recommends a fair and broad‑based tax system, a comprehensive and scalable social protection system and, last but not least, building fiscal buffers and a return to fiscal rules.

Thank you very much for your attention. My colleagues and I are ready to answer any questions that you may have.

Mr. Mombrial: Thank you, Vitor, for very nicely laying the ground for the press conference. You must be used to it by now, but just a couple of ground rules. If you want to ask a question, please raise your hands and wait for me to call on you and someone will come and give you the mike. Please also identify yourself and your network. For colleagues who are online, you can ask your question on WebEx. Finally, for people in the room, just know that we have interpretations in several languages. I will start with the room, then take some online questions. I would like to go first to Erwan Lucas from AFP. Irwin, please. He is right there in the blue shirt.

Mr. Lucas: Good morning. My question is regarding emerging and low‑income countries. Considering the fact that, as you said, we are experiencing various shocks and many countries are already in near or in a debt distress situation, how can they at the same time mitigate the effect of those shocks for the populations and on the other hand have a tight budget to be sure that they would not have a further debt distress?

Mr. Gaspar: Good morning. Thanks very much for your question that allows me to elaborate on a theme that I have already covered in my introductory remarks. I did refer to the survey that the Fiscal Monitor includes measures taken by a group of 174 countries, and I stress that in the case of a low‑income countries, the most salient challenge comes indeed from the food price surge. That reflects a very well‑known statistical relationship that shows that the budget of poorer households has a larger share of spending on food. That applies to poorer households. That applies to poorer countries and explains the debt that we see. The situation exactly as you implied by the question is serious, something that has shocked is that after decades of reduction in extreme poverty, extreme poverty has increased in the world, and it is projected to stay well above the pre‑pandemic expected path going forward. That is a very concerning development. Together with that, we have that food insecurity has increased significantly, as has the number of people that suffer from under‑nourishment. So the issue of nutrition and food security are crucial and priority goals.

As you rightly emphasized in this group of countries, budget resources, financing resources are scarce, but it is in the nature of the political and policy tradeoffs that policymakers face that food security and nutrition have to be given priority. Moreover, you are also right in emphasizing the concern about debt levels and possible debt unsustainability in some countries.

Developments in recent months show that bond markets are now much more sensitive than before to deteriorating or weak fundamentals. Debt raises the specter of more frequent and widespread fiscal crisis. So, we do call for collective action to tackle these challenges. I referred in my introductory remarks to the lifting of restrictions on food and fertilizer exports. I referred to emergency financing through the new Food Shock Window, and the rechanneling of SDRs from richer countries to poorer countries, but it is also important to emphasize the need to have an orderly debt restructuring mechanism and forms of debt relief so as to help this group of countries to put their public finances when that is necessary on a more sustainable path. Thank you.

Mr. Mombrial: Thank you, Vitor. I will go to the left before coming back here. I see Simon, the gentleman in the first row there with the red and blue tie. Yes.

Mr. Ateba: Thank you, Nicolas. Africa currently faces a multitude of crisis. Virtually all the vulnerabilities and shocks that you just mentioned can be found in Africa, unsustainable debt, yet a need for more capital, very high inflation, and a surge in food and energy prices that you just mentioned also, in addition to rising poverty and political and natural instability. Can you talk a little bit more specifically about Africa, where you see Africa right now, what type of fiscal policy responses should be implemented on the continent and what sort of assistance should be provided by financial institutions and lenders like the IMF. Thank you.

Mr. Medas: Maybe I can answer this one. Thank you very much. Indeed, Africa is suffering a set of unprecedented shocks that are creating massive setback on economic development but also especially on creating a food crisis and rising poverty. So, we had seen a significant improvement in many areas pre‑pandemic, but in the recent years, many of these trends have reverted. So what we are seeing now is, for example, according to estimates by the World Bank, 11 million more people will enter extreme poverty now than what would have been expected under pre‑pandemic trends.

The food crisis, as Vitor has already mentioned, has had a devastating effect in Africa. Some estimates indicate that more than 120 million people in Africa alone are suffering from food insecurity. They do not have enough to eat. So this is a very, very serious situation, and governments are facing extremely difficult tradeoffs, as Vitor already mentioned. They are with double‑digit inflation in many countries. They are facing very high debt. Many countries are facing debt similar to the early 2000s when they had to receive debt relief. In our analysis, 19 out of 35 low‑income countries in Africa are already in debt distress or at high risk of debt distress. So this is really a very difficult context for governments to operate.

Where we think fiscal policy should set the priorities, I will focus on three key areas. One is obviously putting resources on the most urgent needs. That is the food crisis. This has to be done, as Vitor said, together with the international community. Second, Africa already before the pandemic had very low levels of tax ratios relative to GDP. These levels have deteriorated. So when you look now compared to what you had seen in the pre‑pandemic trends, we have seen an actual decline in tax ratios to GDP. This makes it much harder for governments to respond to crisis, to manage debt, and to deliver basic services on education and health and infrastructure. So it is important to step up the efforts of domestic revenue mobilization and building state capacity to respond to all of these challenges.

Improving the quality of spending and reducing waste, this includes different areas. For example, some countries' state‑owned enterprises are a big burden on the government budget and on the economy, but also even more importantly the need to improve social safety nets. This will help governments target better those in need while reducing inefficient and wasteful subsidies. So I think all of these are key priorities governments need to do, but it is not going to be enough. Many are facing a very difficult debt and food crisis, and international cooperation is critical on this aspect. This includes initiatives like the G20 Common Framework that needs to move ahead to support countries like Ethiopia, Zambia, Chad.

In terms of the Fund, the Fund in partnership with others has been providing different types of support, policy advice, technical assistance. Our department involves a significant amount of our resources in helping countries improving on areas like domestic revenue mobilization, improving the quality of public investment, but also financial assistance. For example, since 2020 with the pandemic, the Fund has provided about 50 billion in financial support in different ways, through financing instruments, through debt relief, and through the expansion of SDRs.

We also continue to create new instruments and tools, like Vitor mentioned, to help tackle, for example, the food crisis. And we know some countries are already approaching the Fund, like Malawi and Africa, to get support, but also in terms of addressing climate change. In fact, Africa is the region hardest hit by climate change and natural disasters, so this is really another key priority for governments. And the Fund has created instruments to help. We know some countries, including African countries, have already approached us. I believe Rwanda is one of them. Thank you.

Mr. Mombrial: Thank you. I would like to take the question from the gentleman in the front row there and then I am going to come back there. I know I have three or four people waiting.

Question: You said in most countries this means to stay the budget on its tightening costs. Now, in some countries, like Nigeria, there is double‑digit inflation, high interest rates and huge fiscal deficits. Now, what of countries like Nigeria, like I said, that decides to continue to pursue expansionary fiscal policies in contrast towards the Fiscal Monitor just recommended? How do you see it playing out on their economy if the monitory authorities are opposing tightening and the fiscal authorities continue to pursue an expansionary fiscal policy? Thank you.

Mr. Medas: I can take this question. More generally, as I mentioned, governments are facing a very difficult environment in many countries with double‑digit inflation. In this respect, fiscal policy needs to help monetary policy, working together to ensure price stability. This is absolutely critical for stable growth and for some public finances in the countries. Countries like Nigeria, especially those including oil exporters, can take advantage of rising commodity revenues to address some of these needs and to reduce debt. In Niger, which has benefited from higher oil revenues. In fact, we have not seen an improvement in the deficits, as we would hope, part because of the large energy subsidies, but also other issues with production of oil and other pressures on the budget. So our recommendation is to try to save some of these oil revenues to reduce debt but also to use them to address these emergency needs.

Another aspect I would say, as I mentioned before, and Nigeria is one case where tax revenues are really low. This really undermines the capacity of governments to react to these types of shocks and to provide key services. So I would say in the case of Niger where the priorities are really domestic revenue mobilization, you need to increase the state capacity to address the needs of the country. This will also help make fiscal policy more consistent with other efforts to ensure economic stability. Thank you.

Mr. Mombrial: Thank you. I am going to go back to the center and start with the gentleman on the third row who has been waiting for quite a while there and then work my way back up. I see Andrea Shalal from Reuters.

Mr. Brummer: Alex Brummer from Daily Mail in London. Looking at the fiscal tables in the back‑‑in the annex of the report, if you look at the gross debt to GDP of the advanced countries, the U.K. would seem to have one of the best paths to deficit reduction or did have one of the best paths to deficit reduction of all of the G7 countries there, indeed one of the lowest debt‑to‑GDP ratios. I just wondered why you think it has been so badly affected by the fiscal measures which the U.K. government recently announced.

Mr. Mombrial: Thank you. We also got a question online about the U.K., so maybe you can answer both at the same time. We got a question from Channel 4 News, "Given what was said about the need for sound fiscal policy and being prepared for a shock‑prone world, is the U.K. government recent mini budget an example of how not to achieve that?

Mr. Gaspar: Let me answer the question in general terms. When I was preparing for this press conference, it came to my attention an episode at the Annual Meetings of 1979, they took place in Belgrade. Arthur Burns, who had just ended his period as Chairman of the Federal Reserve, delivered the Per Jacobsson Lecture. It has the very memorable title "The Anguish of Central Banking." What Arthur Burns was basically saying was that the main stake in the conduct of monetary policy that had been made in the U.S. during the period from 1965 through 1979, the period where inflation was getting entrenched, consolidated, persistent, was that despite the Fed did tighten a number of times, and it gives the example of '66, '69, and '74, it did not tighten for long enough to end inflation. And that to my mind is a very important reference because it gives an example of what may happen if monetary policymakers do not follow our advice of staying the course and bringing inflation back to target in a timely manner. But that is not why I came up with this quote. It is that the first precondition that Arthur Burns lists for a successful and relatively low‑cost disinflation policy is consistency with fiscal policy. At this point in time, I think it is very important to emphasize that the prospects for a relatively low‑cost disinflation that brings inflation backs to target in a timely manner are much improved if the policy mix continues to be consistent.

I also referred to the general fact in my introductory remarks that markets have become more sensitive to weak or deteriorating fundamentals. Markets are looking for certainty in a very uncertain world. That is very, very difficult to achieve. In a very uncertain world, one can give a sense of direction and orientation, but forecasts are very uncertain, and one needs to conduct policy with flexibility and a fair amount of humility.

In the case of the U.K., the U.K. does benefit from very strong institutions that have been dealing with macroeconomic challenges for a long time. The British Treasury, the independent Bank of England, the independent Office of Budget responsibility, and the expectation is that the announcement of a full‑fledged fiscal plan on October 31st, accompanied by a macroeconomic forecast by the OBR and the costing of fiscal measures by the OBR will contribute to give to the market the certainty that it seeks.

Mr. Mombrial: Thank you, Vitor. If I could go to Lalit with just next to the gentleman which has the question on the third row there with the blue shirt.

Mr. Jha: Thank you. This is Lalit Jha from PTI, I wanted to ask you about India's cash transfer schemes that was the digital mode. I would like to have your impression about that and how is it working in India. In this context, can this be implemented in other countries as well?

Mr. Mauro: Sure, maybe I can speak to this. We have a table in the Fiscal Monitor that looks at some examples of how companies deploy cash transfers and more generally social programs. There is a lot to learn. From India there is a lot to learn. There is a lot to learn from some other examples around the world. We have examples from pretty much every continent and every level of income. If I look at the case of India, it is actually quite impressive. In fact, just because of the sheer size of the country, it is a logical marvel how these programs that seek to help people who are at low‑income levels reach literally hundreds of millions of people. There are programs that target specifically women. There are programs that target the elderly, farmers. Perhaps the interesting part is that in these examples, there is a lot of technological innovation. In the case of India, one thing that is striking is the use of the unique identification system, the Aadhaar. But in other countries, also, there is greater use of sending money through mobile banking to people who actually do not have a whole lot of money, but they have a cell phone. So being somewhat innovative in identifying people, in processing their applications for transfers through digital means, deploying funds through, again, mobile banking. This is something that countries can learn from each other. We try also here to be a little bit of a convening place where people can compare these types of experiences.

Mr. Gaspar: Let me add two very quick remarks. We have in FAD a very ambitious program of application of new technologies and digitalization to public administration. We call that gov tech, and we are collaborating with India in that context as one of the most inspiring examples of the application of technology to solve very complicated issues of targeting support to the people who need it most. And that was what Paolo was very much emphasizing.

I think it is interesting to refer to this gov tech aspect also in the context of our engagement with Africa. And we have been working with many African countries in the area of golf tech, and also in Africa there are very many examples of innovation, which is relevant and inspiring as well. So, the exchange of experiences that Paolo was talking about is something that we are trying to organize, and the amount of learning that can take place is actually quite surprising. There is a lot going on in India, in Africa, and in other parts of the world.

Mr. Mombrial: Thank you, Vitor. As I discussed, I will keep on this center and then I will go take the colleagues on the right. I think Andrea has been waiting for quite a while, Andrea from Reuters.

Ms. Shalal: Thank you. I am Andrea Shalal from Reuters. Thank you. I wanted to ask a lot of things we have been talking about in the Fiscal Monitor you mentioned the possibility of social unrest. We have talked about these problems rising across the world. I would love for you to reflect a little bit about how you see that developing and what those kinds of risks are and how great those dangers are. We have seen a lot of change already in a variety of economies, including advanced economies, but particularly in developed economies. Thanks.

Mr. Gaspar: Thanks. It is a very difficult and open question. I will try to start off and perhaps Paolo will want to elaborate. Clearly fiscal policy is very political. I was looking at the book that Alan Blinder I believe published yesterday, and the political character of fiscal policy in the United States is very well documented in the book, but the proposition is general. Fiscal policy is always everywhere very political.

When you look at the Fiscal Monitor, one aspect that I believe is very important is that we have documented that fiscal policy proved itself to be much more agile, much more powerful than what was believed before. That makes a strong case for an active fiscal policy. Fiscal policy can act, can be effective, can make a difference in people's lives, so it should. But that has a very interesting implication that the Fiscal Monitor develops, and it should be part of the social contract. If the state acts to provide insurance in bad times, it should be building buffers and participating in the upside in good times. Right? That is why the Fiscal Monitor emphasizes the need to be prepared, including by having a broad‑based and fair tax system that in our view could well include taxation of rents, taxation of excess profits, but also a flexible comprehensive and scalable social security system that could be adapted to circumstances like those that countries are facing right now with the energy and food crisis. So I do think that fiscal policy has a central role to play in politics and social cohesion and has also a central role to play in terms of the social contract.

I understand that my answer to your question is very incomplete and so probably my colleagues will want to elaborate.

Mr. Mauro: Just to add, in previous issues of the Fiscal Monitor, we documented how there seems to be an empirical association between social unrest and episodes of spikes in food prices. And what seems to be very politically sensitive, of course, is fuel prices. That is why we have these very difficult tradeoffs now where countries have to be really selective in providing support in the area of food and energy. And we recommend to be a little bit more generous on the food side because, of course, that is basic survival. But when it comes to energy, it is important to be targeted and efficient because it is so costly. So there are these very complicated tradeoffs. I will stop there.

Ms. Shalal: The question was whether you see the issue of a wide scale of social unrest. Is that what is happening now?

Mr. Mauro: I think the way to sort of reduce the risk of that is to give people the feeling the money they pay in taxes is well spent, so we put a lot of emphasis on good governance practices, giving people a feeling that there is no waste, that there is no corruption. And we work in those areas with governments, better fiscal transparency, so people have the feeling that, when they are taxed, their money is well used.

The other angle, this is again a political choice, is to use more progressive types of taxation. So when you have these big crises, those who can afford to pay more perhaps should pay more so that society can survive better.

Mr. Mombrial: Thank you, Paolo. I will take Stephanie, who has been waiting for quite a while, and then if we have time, if it is okay with you, can I take two or three to this last one before I come back to you? Next is Stephanie, and then the two colleagues there on the right have been waiting for quite a while, so I go to you.

Question: Good morning. Thank you. Stephanie, CNBC. You talked about the fact that the bond markets are more sensitive to weakening fundamentals and you mentioned the possibility of fiscal crisis. I wonder if you see such crisis happening maybe in Europe, considering widening spreads, especially in southern Europe and if you have a general assessment of Italy usually considering its high debt. So policy suggestions for the country.

Mr. Mombrial: If the mike could go to the colleague on the fourth floor there raising his hand. Yes, go ahead.

Question: Thanks. I have two questions. One is, usually it is said that inflation is a good thing for an adapter. You had a small graph in the report showing that debt payments and percent of GDP if I am not wrong are going up a little bit next year. Could you elaborate a little bit on that because I think what is important is real interest rate payments and how that is working out.

My second question is, you mentioned that fiscal has to go together with the Central Bank policies now. You mentioned the cost‑of‑living crisis, that governments will be tempted spend more next year, and then there is a huge investment needed on green energy. Can you give us an idea of how this could play out next year with all those needs for financing? Thanks.

Mr. Mombrial: My apologies if I missed it, could you remind us of who you work for.

Question: Andreas from the Austrian Daily.

Mr. Mombrial: If I can go to the gentleman in front who has also been waiting a while, and I will try to take one more, but that may be the last one.

Mr. Bloom: I am Robert Bloom. I am a consultant and an occasional columnist. I was a student of Robert Mandel. I want to bring up a point Mr. Gourinchas did yesterday from your comment, and that is the relationship between monetary policy and fiscal policy. He has called for a consistency, and the Fund is calling for a consistency in those two policies, namely tight monetary policy should be accompanied by tight fiscal policy or loose monetary accompanied. I would like to bring up Mandel's solution to the stagflation problem around 1980 and, anyway, the end of the Carter administration, beginning of the Reagan administration. Mandel disputed the concept of James Tobin's concept of the funnel.

Mr. Mombrial: My apologies. Could you make it quick and go directly to your question?

Mr. Bloom: Yes, I am going to ask a question. The funnel is that policy. The funnel said you have to have tight fiscal with tight monetary. Mandel said the opposite, to address stagnation you need a loose fiscal policy. Fiscal policy addresses the economic growth issue, and the inflation issue is addressed by monetary policy. So on a case of stagflation, you need a tight monetary policy and a loose fiscal policy. In that case, it was tax rate reduction. Go to the U.K. now. The U.K. now just tried that. They wanted to reduce tax rates, loose fiscal policy and with Bank of England continuing the policy‑‑

Mr. Mombrial: Sir, we have to end here. Sir, I have a lot of people waiting.

Mr. Bloom: ‑‑and it seems like the U.K. has done the reverse now and still has inconsistent‑‑now they have tight‑‑now they have loose monetary policy and now tightened fiscal policies. Would you comment on the abandonment of the idea of opposite monetary and fiscal policies? Thank you.

Mr. Mombrial: Thank you, sir.

Mr. Gaspar: Let me go first and then let me come back. There were a couple questions about the policy mix. I am not going in order, if you allow me. There were a number of questions about the policy mix. When we are in a situation where inflation is the dominant policy priority, having alignment of fiscal and monetary policy in terms of the policy mix is beneficial for the credibility of the disinflation policy stance, and it reduces the costs of disinflation. [Tom Sturgeon] does have a number of studies in which this point is made.

If I were to make a structural policy argument in terms of the fiscal policy, my favorite example would be the necessary green transition and climate change that is associated with quite sizable investment needs, and that is something that we discuss in the context of a publication that we put out yesterday, the return of fiscal rules, and we also discuss it in a paper that came out some weeks ago about the European fiscal governance setup. In both cases the importance of taking into account the role of fiscal policy to facilitate structural change, in particular, in that context, the green transition, is well‑documented, and Paulo Medas was associated with both publications, so I am completely aligned with Pierre‑Olivier, and it could not be otherwise.

Now, when it comes to the mechanism through which inflation in the period 2021‑2022 contributed to reducing the public debt‑to‑GDP ratio, the main reason why that is so‑‑sorry, the clearest example of the mechanism at play is given by advanced economies where central banks were at the effective lower bound on interest rates. Fiscal policy tightened in 2021 in many places, continued in 2022. Monetary policy was mostly unchanged in 2021, which basically means that with increase in inflation, real interest rates have fallen, and that is the mechanism that you evoked to explain the dynamics, and that is correct.

When you are doing an accounting exercise, you actually have most of the effect through the denominator effect through the behavior of the nominal GDP, but the two reasonings are the same. It is basically an accounting identity. So you can explain it from one angle or the other, but it is basically the same.

On your point concerning debt risks, when we look at debt risks around the world right now and look at cases where countries are in vulnerable positions as understood as high risk of debt distress or debt distress, using various methodologies, we identify considerable number of countries in excess of 50 that do have those vulnerabilities.

In the list there are no countries that you refer to. That does not mean that there are no debt risks, but they are not as severe as the ones that I was talking about when I referred to countries that are under clear and present market pressure at this particular point in time.

When you look at the specific case of Italy, Italy did increase its debt‑to‑GDP ratio very considerably in 2020, as most countries have. If you look at our latest estimate, you see that the public debt‑to‑GDP path for Italy is actually below what we were forecasting one year ago, and there is a forecasted slow decline in the public debt‑to‑GDP ratio.

If one looks at the primary deficit for Italy and compares with the path that was predicted pre‑COVID, in the years 2023 and 2024, the primary deficit is already very close to the pre‑pandemic projected path. GDP is also in that horizon; 2024, recovering to the growth path that was forecast pre‑COVID.

Now, there are important changes in the composition of the budget. In Italy, there has been an emphasis on growth. There has been an emphasis on sustainable growth. There have been important structural reforms that have been carried out or are entrained, and it does look from that viewpoint that the strategy of Italy is a prudent strategy, which is appropriate for a shock‑prone world.

Mr. Mombrial: I am afraid that is all the time we have. For the colleagues who I could not take the question from, please try to catch up with me after the press conference. My colleague Eva, who is sitting there in the back of room, can also help. We will try to give you some written answers. With this, I want to thank Vitor, Paulo and Paolo for being here today and explaining the Fiscal Monitor. The Fiscal Monitor is now online on IMF.org.

I also want to remind people that the Managing Director will have a press conference tomorrow morning at 8 a.m. That is another opportunity for questions. For questions on countries, we are going to also have a series of press conferences with our Regional Directors, if you want to go into more detail.

With that, thank you, everyone, for being there this morning. Thanks to those who are online. Have a good day.