## Fiscal Monitor Press Conference

_IMF News, October 16, 2019_

## Source details

**Canonical URL:** [Fiscal Monitor Press Conference](https://www.imf.org/en/news/articles/2019/10/16/10162019-vitor-gaspar-press-conference-remarks)

## Other formats

- [Markdown version](/en/news/articles/2019/10/16/10162019-vitor-gaspar-press-conference-remarks/index.md)
- [Structured JSON version](/en/news/articles/2019/10/16/10162019-vitor-gaspar-press-conference-remarks/index.json)
- [Bundle manifest](/en/news/articles/2019/10/16/10162019-vitor-gaspar-press-conference-remarks/bundle-manifest.json)

## Bibliographic details
- Published: October 16, 2019

---

### Role of fiscal policy
- Fiscal policy plays a central role in:
  - managing the synchronized slowdown;
  - preparing for downside risks;
  - contributing to financial stability;
  - financing the Sustainable Development Goals;
  - addressing climate change—the topic of the Fiscal Monitor.
- Countries with budgetary room should use it to support aggregate demand given that inflation and inflation expectations are drifting below target and interest rates are negative in many advanced economies.

### Policy recommendations for major economies
- Be prepared for coordinated action in case of a severe downturn.
- Use fiscal space now where available to support aggregate demand because further decreases in policy interest rates are limited.
- Avoid complacency fueled by low interest rates that may lead to overborrowing, investors’ panic, and market disruption.
- Prudent fiscal policies should be anchored by a medium‐term framework where public debt and interest‐to‐tax ratios are high and rising.

### Constraints and risks in other economies
- Sovereign bond yields are negative across the maturity spectrum in most advanced economies; policy interest rate scope is limited relative to the pre-Global Financial Crisis period.
- In emerging markets and low‐income developing countries:
  - public debt ratios are high and rising;
  - the cost of servicing debt is increasing;
  - some countries are vulnerable to exchange and interest rate shocks.
- Low interest rates in advanced economies have compensated for high debt levels, a dynamic not present in many emerging markets and low‐income countries.

### China and emerging market considerations
- In China, the largest emerging market economy:
  - the economic slowdown and fiscal stimulus are expected to widen the deficit;
  - fiscal policy should help dampen the negative impact on growth from trade disputes and support long‐term re‐balancing.

### Fiscal policy, development, and SDGs
- Many countries, particularly low‐income developing economies, need to substantially raise spending to meet the SDGs by 2030.
- Spending increases should be framed within a comprehensive growth and development strategy.
- Building tax capacity is necessary to generate the extra revenue for inclusive development.
- Improving spending efficiency is crucial for good governance and to ensure complementarities between public finance, private investment, and official development assistance.

### Climate change — Fiscal Monitor highlights and illustrative scenario
- The Fiscal Monitor is fully digital to contribute to limiting global warming.
- Current pledges under the Paris Agreement are not enough; they will limit global warming to 3°C.
- To limit global warming to 2°C or less, finance ministers need to take further substantial fiscal policy actions.
- Illustration using a single instrument (not a recommendation): a carbon tax rising to $75 per ton by 2030.
  - If the carbon tax of $75 per ton were implemented globally:
    - China and India would account for almost 70 percent of CO2 reductions among G20 economies (compared with a no action scenario).
    - Retail electricity price increases would vary between 2 percent in France and 89 percent in South Africa, reflecting differences in the share of coal in power generation.
- The goal is to reshape the tax system and fiscal policy more generally to discourage emissions.
- It is crucial that additional revenues from carbon taxation are used appropriately to reduce burdens and make reform more politically acceptable; options include labor tax cuts, payments to households, and public investment.

*Source: Fiscal Monitor Press Conference — Vitor Gaspar, Director Fiscal Affairs Department, October 16, 2019.*

---


## References

- [Vitor Gaspar](http://www.imf.org/external/np/bio/eng/vt.htm)
- [People's Republic of China and the IMF](http://www.imf.org/external/country/CHN/index.htm)
- [France and the IMF](http://www.imf.org/external/country/FRA/index.htm)
- [India and the IMF](http://www.imf.org/external/country/IND/index.htm)
- [South Africa and the IMF](http://www.imf.org/external/country/ZAF/index.htm)
- [Speeches](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2019/10/16/10162019-vitor-gaspar-press-conference-remarks_