Fiscal Monitor April 2023
Fiscal Monitor, April 2023
Source details
- Canonical URL
- Fiscal Monitor April 2023
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Bibliographic details
- Published: April 12, 2023
Overview
- Title: On the Path to Policy Normalization
- Date: April 2023
- Central theme: Inflation affects public finances and the distribution of well‑being across households. Targeted fiscal policy can help lower inflation and protect vulnerable households from the cost-of-living crisis.
- Context: Public finances have fluctuated with multiple shocks since the pandemic, characterized by atypical growth, inflation dynamics, and fiscal support to mitigate the shocks. Recent financial turmoil aggravated an already uncertain and complex outlook with tight financing conditions and mounting concerns for debt vulnerabilities.
Key findings and analysis
- Fiscal policy should prioritize consistency with monetary policy to restore price and financial stability, while supporting the most vulnerable.
- Abrupt changes in financial conditions call for fiscal restraint to tackle fiscal vulnerabilities.
- Governments need to give greater priority to rebuilding fiscal buffers by developing credible risk-based fiscal frameworks that:
- promote consistent macroeconomic policies,
- reduce debt vulnerabilities over time, and
- build up the necessary room to handle future shocks.
- Chapter 2 specific findings:
- Surprise inflation may offer some breathing room for debt ratios, but attempts to keep surprising bondholders have historically proven futile or harmful.
- Indexation practices vary considerably across countries; when reviewing them policymakers need to balance protecting specific groups and avoiding making inflation more persistent.
- Redistribution effects of inflation depend on three channels: consumption patterns, income, and wealth.
- The chapter estimates the effect of fiscal policy on inflation and shows that targeted fiscal policy can support monetary policy in lowering inflation while protecting those most affected by the cost-of-living crisis.
Policy recommendations
- Coordinate fiscal policy with monetary policy to restore price and financial stability while providing targeted protection for vulnerable households.
- Exercise fiscal restraint in the face of abrupt tightening in financial conditions to address fiscal vulnerabilities.
- Rebuild fiscal buffers through credible risk-based fiscal frameworks to increase resilience to future shocks.
- Carefully review indexation practices to balance group protection with the risk of making inflation more persistent.
- Use targeted fiscal measures to support disinflation efforts and protect those most affected by the cost-of-living crisis.
Fiscal Monitor April 2023 — On the Path to Policy Normalization (April 2023).
Content in this bundle
- Chapter 1
- Chapter 1. Executive Summary. IMF Fiscal Monitor, April 2023
- Chapter 1 Online Annexes. IMF Fiscal Monitor, April 2023
- Chapter 2
- Chapter 2 Executive Summary Infographic. IMF Fiscal Monitor, April 2023
- Chapter 2. Executive Summary. IMF Fiscal Monitor, April 2023
- Chapter 2. Online Annexes. IMF Fiscal Monitor, April 2023
- Executive Summary
- FM Database Apr. 2023 — Dataset overview
- Foreword
- Methodological and Statistical Appendix. IMF Fiscal Monitor, April 2023
- Full Report