## Why Our World Needs Fiscal Restraint in Biggest-Ever Election Year

_IMF Blog, April 17, 2024_

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**Canonical URL:** [Why Our World Needs Fiscal Restraint in Biggest-Ever Election Year](https://www.imf.org/en/blogs/articles/2024/04/17/why-our-world-needs-fiscal-restraint-in-biggest-ever-election-year)

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## Bibliographic details
- Authors: Era Dabla-Norris, Vitor Gaspar, Marcos Poplawski-Ribeiro, Jiae Yoo
- Published: April 17, 2024

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### Overview
- Publication date: April 17, 2024; authors: Era Dabla‑Norris, Vitor Gaspar, Marcos Poplawski‑Ribeiro, Jiae Yoo.
- The global economic and financial outlook has improved in the last six months: inflation has fallen, financial conditions have eased, and risks to the outlook are balanced.
- Many countries continue to struggle with high public debt and fiscal deficits amid high real interest rates and dimming medium-term growth prospects.
- The April 2024 Fiscal Monitor calls for governments to avoid slippages and focus on rebuilding buffers and safeguarding fiscal sustainability over the medium term.

### Recent fiscal trends and risks
- Fiscal policy shifted to be more expansionary last year after rapid improvement in debt and deficits in the prior two years.
- Only half of the world’s economies tightened fiscal policy last year, down from about 70 percent in 2022.
- Four years after the start of the pandemic, public spending, excluding interest payments, remained:
  - about 3 percentage points of gross domestic product above prepandemic projections in advanced economies, excluding the United States, and
  - 2 percentage points above them in emerging market economies, excluding China.
- Global public debt edged up to 93 percent of GDP in 2023 and remained 9 percentage points above the prepandemic level.
- The increase in global debt was led by the two largest economies, United States and China, where debt rose by over 2 and 6 percentage points of GDP respectively.
- Slowing growth in China could weigh on global growth and trade; high and volatile government bond yields in the United States could tighten financing conditions globally.

### Election-year dynamics
- In 2024, a record number of countries, home to more than half of the world’s population, are holding national elections.
- Historical patterns: governments tend to spend more and tax less during election years.
- Empirical finding: deficits in election years tend to exceed forecasts by 0.4 percentage points of GDP, compared to non‑election years.
- Policy implication: in this great election year, governments should exercise fiscal restraint to preserve sound public finances.

### Projections and fiscal gaps
- Moderate fiscal tightening is expected to resume in 2024, but significant uncertainty remains.
- Under current policies, primary deficits—which exclude interest expenses—will remain above debt‑stabilizing levels in 2029 in:
  - about a third of advanced and emerging market economies, and
  - in almost a quarter of low‑income developing countries.
- The required average reduction in primary deficits is estimated at 2.1 percentage points of GDP for emerging markets with rising public debt‑to‑GDP ratios in the projections.
- Without further efforts, the return of fiscal policy to its prepandemic normal may take years.

### Policy recommendations
- Immediately phase out legacies of crisis‑era fiscal policy, including energy subsidies.
- Pursue reforms to curb rising spending while protecting the most vulnerable.
- Advanced economies with aging populations should contain spending pressures for health and pensions through entitlement reforms and other measures.
- Ensure revenue keeps up with spending over time:
  - In advanced economies, targeting excessive profits as part of the corporate income tax system could bolster revenues.
  - Emerging market and developing economies could raise tax revenue potential by broadening tax bases, improving tax design, and strengthening revenue administration.
  - Such measures could, in ideal circumstances, yield as much as an additional 9 percent of GDP, according to the research.

### Institutional and international measures
- Adopt a medium‑term approach to budgetary planning and execution to build foundations for sound and sustainable public finances.
- Enhance transparency of public finances and increase use of modern technology (GovTech).
- For countries in severe debt distress, orderly and timely debt restructuring is important.
- Continued international cooperation—including through the Group of Twenty Common Framework and the Global Sovereign Debt Roundtable—is crucial to facilitate efficient debt restructuring processes.

*Based on Chapter 1 of the April 2024 Fiscal Monitor.*

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## Content in this bundle

- **Chapter 1**
  - [Chapter 1 (Markdown version)](/-/media/files/publications/fiscal-monitor/2024/april/english/ch1.pdf.md){rel="alternate" type="text/markdown"}
  - [Chapter 1 (PDF)](/-/media/files/publications/fiscal-monitor/2024/april/english/ch1.pdf){rel="external" type="application/pdf"}

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## References

- [latest Fiscal Monitor](https://www.imf.org/en/Publications/FM/Issues/2024/04/17/fiscal-monitor-april-2024?cid=bl-com-SM2024-FMOEA2024001)

_Source: https://www.imf.org/en/blogs/articles/2024/04/17/why-our-world-needs-fiscal-restraint-in-biggest-ever-election-year_