The IMF places the peak of Spain’s deficit and debt in 2021 and proposes another global truce on fiscal discipline


The diagnosis of the IMF’s Autumn Fiscal Monitor – the report on national accounting or the great barometer of budgetary consolidation – emerges, according to Vitor Gaspar, the director of the IMF’s Fiscal Affairs Department, in unison with the adjustments and updating of the financial statements. official global debt data at the end of 2020. That is, at the end of the Great Pandemic. Or the global synchronized recession caused by Covid-19, according to the multilateral jargon of the Fund itself. In which the indebtedness of governments, households and non-financial corporations rose to 226 trillion dollars; three times the GDP of the planet. By adding 27 trillion more to the combined international bill for 2019. As much as the sum of the economies of the US and Japan; first and third in the world.

The statistic just out of the Fund’s engine room – “by far, a historical record”, as stated by the Prosecutor Monitor – leads Gaspar not only to “fully” justify his escalation, “in response to the social, economic and social consequences. financial information of the Covid-19 ”. But to prolong the predisposition to spending. “Fiscal policies will continue to be accommodative and increase their resources towards energy transitions and digitization processes” in which the main advanced economies are immersed, the report affirms with its approval. Because a series of additional measures are expected in the 2022 budgets. The sum of the resources released by Europe and the US – mostly long-term investment plans – to these two objectives will add 4.6 trillion dollars – a figure similar to the size of German GDP, the fourth of the planet – between 2021 and 2026.



In contrast to emerging markets and developing countries, whose return to the black numbers in their GDP will depend on vaccination campaigns and the efforts of their governments to increase their funds to this double objective: health and economic. In an adverse climate, of rises in interest rates and drainage of public accounts. Reason why the Fund has just activated 650,000 million dollars of its Special Drawing Rights – its multilateral currency – to inject lending liquidity to these nations and provide them with fiscal support for their debt services.

Even so, global debt will decline at the end of this year by one percentage point. Around 97% of global GDP. Due essentially to the “strong contribution of nominal growth” of the economies, and to the “gradual reduction of the primary deficit”. After high-income nations and China have been responsible for the accumulation of more than 90% of debt in 2020.

In this context, the IMF ventures the end of the budgetary indifference to Spain. With a deficit of 8.6% of GDP this year – compared to the 11% recorded in 2020 – and a schedule of gradual cuts: from 5% in 2022 to 4.3% in 2026. Cota, the latter, similar to the fiscal gap that registered a decade earlier, in 2016, the Spanish economy after a long seven-year adjustments by the Government of Mariano Rajoy – supervised from Germany – as a formula to get out of the credit crunch European and clean up the Hispanic financial system of toxic real estate assets. The Fund also sees the peak of debt at the end of this year, when it will reach 120.2% of GDP. With dropper reductions in the next five years.

Five years for budget consolidation

Of course, within a climate of relaxation, outside the rigors of orthodoxy. “Among advanced economies, supportive fiscal policies will be maintained, with an additional deficit of 2 points of their joint GDP in 2021 and another three projected for 2022”, which relegates “the return to pre-pandemic levels in the year 2026” . In other words, the IMF expects a long five-year period of resources and investments before the industrialized powers enter into spaces of consolidation of their state accounts, which, in Europe, implies a deficit of less than 3% of GDP, according to the Stability Pact and Increase. While emerging and developing markets will have to advance without too many stimulus programs, with their production rates and fiscal income with no signs of restoring their pre-Covid-19 rhythms and with the only pattern of redirecting their deficits through spending cuts .

Regarding global debt, which will begin to decline without reaching 100% of GDP, experts from the Fund’s Fiscal Area clarify that the powerful programs for the purchase of bonds of sovereign origin from central banks -especially from the high-income economies – cannot hide the “increased gross financing needs of governments in the future”. Faced with challenges such as sustainability and digitization. This is why the EU has already launched three Next Generation bond issues with a duration of between 5 and 30 years for a value of 45,000 million euros. From the first, to ten years, on June 7. And they have captured the interest of investors. Due to the commitments of European resources to energy neutrality (37% of the 750,000 million euros of the EU stimulus program) and the injection of technological capital, destination of another 25% of the total endowment.



Same as in the US. With the Plan for American Families (2 billion dollars), the Employment Plan (another 2.3 billion), to which must be added a third of Infrastructures and the New Green Deal, still to be definitively outlined in Congress -the first- and in the White House, the second. And that he anticipates a shift in priorities from the Biden Administration. Towards a redistribution of wealth in terms of household vulnerability, towards greater accumulation of human capital, towards improved productivity and towards net zero CO2 emissions.

ICO loans as an example of caution

Governments, says the Fund, must limit their financial exposure, limit the duration and size of their loans and apply credit restructuring to temper their payments and their future maturity schedules. Without neglecting the priorities of their agendas. In this sense, the Fund gives as an example the caution of ICO loans during the pandemic in Spain: guarantees subject to coverage of between 60% and 80% of the credit depending on the size of the beneficiary company and the purpose of the guarantee. In the same way, it highlights the management of financial aid from the Executive of Ukraine during the pandemic, which was restricted to companies in the country with risks above the guarantee thresholds established by Kiev.

A notable part of the report emphasizes a triple global challenge. The division of vaccines, financial distortions and concerted actions against climate change. A triumvirate of affairs with a clear background on world indebtedness. Both the public and the private. As well as on the stability of the financial architecture and the sustainability of state finances. While pre-Great Pandemic tax revenue recovers. And progress is being made in the taxonomy of green economies. This implies “the unavoidable approval of structural reforms” and a change in the fiscal appearance, aspect in which Gaspar applauds the initiative developed from the OECD at the request of the G-7 and the G-20 to apply a minimum tax rate of 15 % to companies all over the planet.

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