Transcript

Transcript of the 2023 Fiscal Monitor Press Briefing

April 12, 2023

SPEAKERS:

IMF:

VITOR GASPAR

Director, Fiscal Affairs Department

PAOLO MAURO

Deputy Director, Fiscal Affairs Department

PAULO MEDAS

Division Chief, Fiscal Affairs Department

NICOLAS MOMBRIAL (MODERATOR)

Senior Communications Officer, Communications Department

MR. MOMBRIAL: Good morning, good afternoon, or probably even good evening for some of you watching us online. Thank you for joining this press conference on the IMF’s Fiscal Monitor “The Path to Policy Normalization”.I am Nico Mombrial with the IMF’s Communications Department, and I am so pleased to introduce this morning the Director of the IMF Fiscal Affairs Department, Vitor Gaspar. He is joined Paolo Mauro, Deputy Director of the Fiscal Affairs Department and Paulo Medas, division chief of the Fiscal Affairs Department. They and their teams have all been working hard to deliver this Fiscal Monitor to you today.

Before taking your questions, let me kick start our briefing today by turning to you Vitor for your opening remarks and to explain to us what the title of the Fiscal Monitor “the Path to Policy Normalization” means.

MR. GASPAR: Good morning, everyone. So good to see you so early in the morning and this shows your keen interest in policy development all around the world based on the fiscal monitor. Three years after the pandemic, fiscal policy has moved a long way towards normalization. Already, in 2021 and 2022, debt and deficits fell rapidly from record levels to allow for extraordinary support in the early stages of COVID-19, many countries suspended fiscal rules. Now, most of these countries plan to go back to rules, often after some rethinking.

However, despite having come halfway down from unprecedented levels reached in 2020, global public debt is more elevated, and projected to grow faster than foreseen before the pandemic. It is anticipated to start going up again by about one and a fourth percentage point per year and into the medium term. By the end of our projection horizon, 2028, public debt in the world is expected to reach almost 100 percent of GDP, back to the record levels set in the year of the pandemic. It is worth pointing out that primary deficits are also predicted to stop declining, and to stay above pre-pandemic levels over the medium term.

These global trends are shaped by some large advanced and emerging market economies. Brazil, China, Japan, South Africa, Turkey, the U.K., and the U.S. are all projected to see increases in public debt ratios in excess of five percentage points of GDP over 2023 to 2028, with the two largest economies contributing most to the increase.

In the United States, public debt to GDP is projected to increase by three percentage points of GDP per year from 2023, about twice the pace projected pre-pandemic. By 2028, the U.S. public debt to GDP ratio is expected to exceed 135 percent of GDP, well above the pandemic peak.

China debt to GDP ratio has increased continuously after the jump up in 2020. There was no decline in China in 2021 or 2022. In 2028, it will have almost doubled pre-pandemic levels and surpassed 100 percent of GDP.

Excluding China and the U.S., world public debt ratios would be slowly declining over the medium term.

Rising real interest rates increase borrowing costs for countries, making fiscal management more challenging. For countries dependent on foreign currency borrowing, tighter global financing conditions are also a source of pressure as exchange rate depreciation can lead to significant surges in debt. Additionally, rapidly increasing interest rates may create complications for financial stability, as seen in recent financial turbulence in the U.S. and Europe. The fiscal monitor makes a strong case for fiscal tightening in many countries, based on four arguments.

First, fiscal policy can and should support monetary policy in bringing inflation back to target. Stronger fiscal balances contribute to slow down aggregate demand, and hence moderate required increase in monetary policy rates.

Second, a more balanced policy mix again by moderating sharp increases in policy rates contributes to financial stability.

Third, a sound overall balance helps limit public finance risks and builds fiscal space to respond to adverse macroeconomic or financial development. Empirical evidence indicates that countries with insufficient buffers that enter a financial crisis suffer deeper and longer recessions. This is particularly the case for emerging markets.

Fourth, stronger balances also contribute to long term debt sustainability in a demanding context that includes demographic trends, digitalization, and the green transformation.

The Fiscal Monitor explores how fiscal policy can help this inflation and protect vulnerable groups at the same time. The results of our analytical chapter show that when monetary policy acts alone, low-income households bear the brunt cost of this inflation. However, fiscal tightening accompanied by target transfers moderates interest rate increases required to achieve inflation targets, and limits the decline in consumption for most households, including, by construction, no fall at all in the consumption levels for the poorest households.

Looking further ahead, sound fiscal policies today and over the medium term enable governments to contribute to sustainable and inclusive development and to a resilient society. Low-income countries have insufficient fiscal space with tax to GDP ratios too low to support the state’s economic policy roll. Improving tax capacity is crucial for public credit, financial development, and safe integration in world capital markets. It also helps to create room to respond to shocks, like the food price surge, or extreme weather events, and is necessary for the achievement of the Sustainable Development Goals.

Sound public finances are crucial for green investments and tackling climate change. Business as usual will deliver increasing greenhouse gas emissions this decade. Urgent country, individual, and global collective actions are required to limit temperature increases to tolerable levels, and thereby avoid catastrophic climate change. Climate change is the topic of the forthcoming fiscal monitor in the fall. Thanks for your attention. My colleagues and I are ready to answer your questions. Nicolas, back to you.

MODERATOR: Thank you, Vitor. So, we’ll now open the floor for questions. But before we do that, a couple of ground rules. So, if you want to ask a question, please raise your hand, and a colleague will come and give you the microphone. When you ask your question, please identify yourself and the outlet you’re from. And for the colleagues that are online on Webex, you can let my colleague know that you want to take the floor, and they will let me know.

We got one or two questions in advance that I think are good scene settings, so I’ll maybe start by these two. I would like to ask Paula from Rai Italy; do you want to come in?

QUESTIONER: Paula from Rai from Italy. This is my question to answer. Could we really return to normality after COVID-19 energy crisis and now the war in Ukraine? And what is the normality for us and for you?

MR. GASPAR: Thanks a lot for your question. The Fiscal Monitor explains that the pandemic was a very large shock that justified very large responses all around the world. And so, the jump in debt and deficits at that point in time was unprecedented. The pattern is so strong that you actually see it even better if you have intra-annual data for the year of the pandemic itself. The immediate reaction of fiscal policy was quite impressive. In the following two years, 2021 and 2022, there was quite a sharp correction of debt and deficits, so much so that the fall in debt levels over the two years is the largest on record for 70 years. Right? So, there is a process of a very sharp response for the pandemic, and then an expiry of some of these extraordinary measures at the same time as the financial system, the economy, the population get used to the pandemic itself. It was a process of normalization in this sense.

But at the same time, many countries, as I indicated in my introductory remarks, suspended fiscal rules. They’re now going back to rules. But are they the same rules? Well, actually, there is quite a rethinking going on, and some adaptation in the rules going forward so there is a normalization, but we don’t know yet how the new public finance normal will look like.

MODERATOR: Okay, thank you, Vitor. I just want to take one more from Pablo, who is the gentleman in the front row, and then please start raising your hands, then I’ll move to the questions in the room

QUESTIONER: Hi, thank you very much. Pablo from El Mundo from Spain. I have two questions. One of them is –- well, both the WEO and the Fiscal Monitor, they describe a scenario of high debt to GDP ratio, high deficits, low economic growth, and no way to go back to the zero-bound rates any time soon. So, could it be reasonable to expect a debt crisis not just in low-income countries, as it is happening right now, but even in industrialized countries, for instance perhaps coming back to the euro crisis of 2010, 2014? This is one of my questions.

The other one is, the Fiscal monitor advocates using fiscal policy to tame inflation, to put it under control. Isn’t it too late now to try to apply fiscal policy to control prices? Thank you.

MR. GASPAR: So, thanks for the two questions. On the first question, that is, how likely is it to have a generalized sovereign debt crisis right now, you may recall from yesterday’s press conference on the World Economic Outlook that the adverse scenario of the WEO has a probability of about 15 percent. It’s a severe scenario, but nowhere near the type of scenario that you’ve portrayed. So, the probability of your scenario must be very low.

Still, we do know that sovereign debt crisis in advanced economies can happen; you mention the sovereign debt crisis in the euro area in 2010, 2011, 2012, 2013. And it’s clear that risks have increased, and it’s very important to be alert to developments in financial markets. Six months ago, we were discussing some disturbances in the market for treasury guilts in the U.K. So, clearly, the risks exist, and those risks are among the public finance risks that have to be managed, and extreme scenarios should be avoided to the extent possible.

On the issue of inflation and fiscal policy, that is a very important topic right now. The topic dominates the fiscal monitor this time. It is covered both in chapter one and also in the analytical chapter two. Our base message is that fiscal policy, in many countries, can and should support monetary policy, the debt helps the credibility of the disinflation process, and by contributing to moderate aggregate demand helps limit the necessary increases in monetary policy rates, and therefore eases the burden on monetary policy. But I’m sure that my colleague, Paolo Mauro, has something quite interesting to add.

MR. MAURO: Sure. Well, let me come back to the question that you were raising, is it too late? and I would emphasize that there are things that governments can do pretty quickly to reduce the fiscal deficit. Just one example would be to reduce any widespread support for energy prices that goes to everybody. So, one quick way of reducing the overall fiscal deficit would be to make that support much more targeted only to those who truly need support, and that would pretty quickly reduce the deficit and be more efficient. Okay.

MODERATOR: Thank you, Vitor and Paolo, and I’m hopeful that, you know, the answer to these two questions would be useful to all the journalists in the room. So now moving there, okay. I think I see, Julian’s, the gentleman here.

QUESTIONER: Thank you very much. Julian from Nation Media Group in Kenya. Speaking about the issue of a balance policy mixed between monetary and fiscal, in sub-Saharan Africa, we have scenarios like in Nigeria and Ghana where even before Russia-Ukraine, inflation had been trending above the prescribed central bank limits. And I’m just curious, in an environment of tightened fiscal space, what role can fiscal policy now play in an environment like that where monetary policy seems to have failed to control inflation? Thank you.

MODERATOR: Thank you.

MR. MEDAS: Maybe I can address. Thank you.

MR. MAURO: So, there are different factors that can drive the differences in inflation dynamics in countries. One is when you have these shocks, for example, food prices or energy prices, the effect on countries can be very different. And for example, low-income countries, a shock in food prices can have a very large effect on the households’ consumption basket. And that will be reflected also on a higher inflation. Also, if you lack a credible policy framework and the anchor inflation expectations, the effect of these shocks can be much larger and persistent over time. So, that's part of the problem.

Also, talking about cases like Nigeria or Ghana, where you have a large dependence on commodity prices and large -- you can have effects of very large increases in oil prices, for example. So, what happens in oil exporters is that when you have very large movements in oil price, this can lead to destabilization in the macro and the domestic economy. For example, if you have a large revenue windfall like we have seen in the last years, this can lead to inflationary pressures in these countries.

Fiscal policy can play a major role here. So, if you have a counter cyclical fiscal policy, that is, if the Government save part of these windfalls, that's going to reduce the inflation pressures and it's going to build buffers so that you can react when oil prices fall. And so, you make the economy more stable.

But if fiscal policy is procyclical, so that there is spending increases when oil price increases, that is going to create more problems for inflation. So, ultimately, you really need a consistent macro policy framework with basically fiscal and inflation and monitor policy work together to ensure this macro stability and price stability. And the problem is, once you lose the inflation expectations, so they become de-anchored, then it's going to be much more difficult. So, you're going to have to have both tight fiscal and monitor policy for longer. And so, the cost is larger to bring price stability back. So, that's, I think it's the problem it's facing for many of these countries.

MODERATOR: Okay. Thank you. I'll take a couple more questions from this side before coming back to colleagues there. I think -- okay, I'll take Lalit and then I'll come to Simon Guthrie and the gentleman. Lalit, do you want to go first?

[MR. Jha]: Thank you. This is Lalit Jha from Press Trust of India. Thank you for doing this. I wanted to ask you about the debt crisis. How serious do you think it is, in particular, the developing world, and in what way the international community policy makers, institutions like IMF and World Bank, can help in addressing this? And in this context, if you can give us, give me your assessment of the debt situation in India.

MR. GASPAR: Okay. So, I will address the general question on debt risks in the world. And then I will pass on to my colleague Paolo Mauro to cover India.

So, we do see that low-income countries have in our projections very fast declining public debt GDP ratios over the forecast period. We also see that this group of countries reacted to the pandemic much less than other countries. So, the jump up in debt and deficits was smaller for this group of countries.

What we see there is clearly countries that face severe fiscal space constraint, that faced severe financial constraint. The recent development, say in the last couple of years, show that these strengths have become even more acute. And at this point in time, it is correct to refer to a funding squeeze for these countries. Given that the situation even before the pandemic was not brilliant, say in terms of prospects for achieving sustainable development goals, we can see how serious the issue is right now. The first of the sustainable development goals is poverty eradication. And it turns out that poverty has turned up after many years of trending down. This is a very worrisome constraint. It's a very worrisome development. There are countries in this group that are in debt distress already, or at high risk of debt distress.

As you said, the IMF has one of its priorities to contribute to ease those financing constraints. And it's calling on the global community and the community of creditors to act.

One important aspect is to act on timely debt resolution. The G20 has the common framework to resolve these issues. It's important to have it working more expeditiously that up to now and the IMF, the World Bank and the India Presidency of the G20 have put in place a global sovereign roundtable that is meant to help bringing together important stakeholders in this direction.

One of the IMF's priorities for the Spring Meetings is to replenish the financial capacity of the PRGT, and we would like that process to be completed in the next six months or so. Moreover, there are debt problems that extend beyond the low-income developing countries. Some middle-income countries are unfortunately affected as well, and the roundtable that I have already referred too can have a positive contribution. And I pass on to Paolo on India.

MR. MAURO: Sure. So, in India specifically. Of course, the global context is one of elevated debt and somewhat rising debt in the medium term, but it is very diverse as, as Vitor just mentioned. The case of India is interesting because among the large economies is one where we project that the debt ratio will remain stable in the medium term, unlike some other large economies where we do see a continued increase. The debt ratio in India right now is 83 percent. So, it's high. The good news is that it's largely in domestic currency. It's held domestically. It's also at fairly long maturity. So, those are the positives.

The other positive is that because we project very strong economic growth into the medium term. That is going to allow the debt to remain stable. In this year's budget, the authorities appropriately reduce the deficit somewhat. They did so by eliminating certain subsidies and that goes in the direction of, again, reducing demand and helping to curb inflation. So, that would be the broad pattern for India.

MODERATOR: Thank you. So, I'm aware the time is flying quickly, so sometimes we'll try to group some questions. If I could take Simon, the gentleman in front there, and then probably Godfrey who is sitting next, sitting with you. I think you been talked to you. The question may be similar and then I promise I'll come back to you.

MR. ATEBA: Yes. Thank you, Nicolas. Simon Ateba with Today News Africa in Washington, D.C. Mr. Victor, glad to see you again. I was wondering if you could talk a little bit about the situation in the Horn of Africa. As you know, they're having one of the biggest humanitarian crisis in Ethiopia, the Tigre crisis, and some of them are protesting outside. These recommendation about tightening fiscal policy, do they apply also for the region with the drought and all the issues there? And if you can talk a little bit more specifically about Ethiopia, and if someone can talk to you about Nigeria also. Thank you.

MODERATOR: Okay, thank you. Maybe before I go back to my colleagues. Godfrey?

MR. MUTIZWA: I think actually he addressed part of the question that I was going to ask, but I was also going to ask a question around the broader African picture and the main drivers for the large debt increases that we see on the continent.

MODERATOR: Okay. And just a reminder that my colleagues are going to answer these questions, country questions by focusing on fiscal policy, for all the more detailed questions about IMF programs, we're going to have regional press conferences in the next two days.

MR. MEDAS: Sure. Thank you very much. And some of the themes for Africa, similar to what Vitor already mentioned, but there are some important differences also. So, what we have seen in Africa was at the time of at the heart of the pandemic as other countries, an increase in deficits, especially as the economies were hit hard by the crisis. But the fiscal space was much more limited than the rest of the world. So, the duration was much smaller.

Still in the, in more recent years, what we have seen is a very gradual reduction in deficits in general. And this is mainly driven by the commodity exporters. The other countries, the efforts is much harder as, as you mentioned, because these countries are still facing with a series of other shocks, including the energy and food crisis. And so, Governments are trying to address these priorities at the same time they're facing a funding squeeze. A very difficult condition.

In this environment, what we have seen in the depth dynamic especially in Africa among low-income countries is that debt continues to rise and partly because the deficits remain elevated. But the other part is because interest rates are rising and many countries that have also seen depreciation of the currencies, which also raises debt.

So, this has created or intensified the debt sustainability concerns that will need to be addressed. At the same time, you're dealing with these very difficult conditions including food insecurity. As was mentioned, more than 130 million people in Africa alone are living under extreme food insecurity.

So, what we recommend in this perspective, yes, you need a tight fiscal policy for the reasons have been already mentioned. One is obviously the containing inflation, but the other is this heightened debt sustainability concerns and the lack of access to financing under this much tighter global financial conditions, especially for low-income countries.

But, how to do this in a way that protects the most vulnerable. Two things we see: One, tax revenues remain very low in most low-income countries, including in Africa. For example, tax revenues in low-income countries remain 5 percent of GDP on average below emerging markets. And they’re half of the tax revenues in advanced economies. So, more efforts to increase tax capacity, create fiscal space, not only to manage the debt burdens, to rising debt burden, but also to address these other priorities, including achieving the development goals.

The other part we see is improved the quality and efficiency of spending, including, in many of these countries, you have untargeted subsidies like energy subsidies. Restructuring these subsidies, make it much more targeted to those more vulnerable, will first help those who really need and increase savings for other priority spending. So, these are broadly the key efforts we see for countries to do. And of course, as Vitor already mentioned, we need and we are calling for support from the international community in terms of debt relief, helping on the debt restructuring efforts. Thank you.

MDOERATOR: Okay, thank you. So, in the speed that we have a lot of questions, I'm continuing grouping them. I have the gentleman in front has been waiting for a while, and then I'll probably go the gentleman on the third-row area, then I'll go to the room and then I'll come back and take probably three or four at the same time. And I also see you guys there.

QUESTIONER: Yeah. Thank you so much. Good morning. So, the first question is overall about world Government debt. IMF expects that world government debt to rise to almost 100 percent of GDP in 2028. What are the main risks that you see for the global economy caused by this increase?

And the second question, it's more specific about Russian public debt that will rise to quarter of GDP in 2024, 2025, and then decrease. So, what will drive these dynamics? And from your perspective, what measures will be implemented by Russian fiscal authorities to decrease debt and come to positive fiscal balance? Thank you so much.

MODERATOR: Thank you. So, if you could give the microphone to the gentleman on -- sitting over there.

MR. ELLIOT: Thank you. Larry Elliot of the Guardian. You said at the start of your presentation that global debt to GDP was going to rise to around a 100 percent. Is that too high a level to have in the event that there's a further adverse shock to the global economy? You seem to be suggesting that you think it is too high? And if so, what level would you think would be suitable for country -- for the global debt GDP ratio to be at, to have some fiscal space in the event of another crisis? And over what period do you think it should come down to that level?

MR. MEDAS: Okay, so thank you. If you allow me, I will answer the question on debt using Larry's formulation. If that is not enough for you, come back please. I'm not trying to avoid your question at all. On the Russia specific question. One of my colleagues will answer that one. So, your question I believe is very good because, of course, the development on global public debt summarizes what's happening in the world, but it's very clear that there is enormous differentiation in the world.

For example, I stress the very fast increase in public debt to GDP projected for China and the U.S. At the end of the period, both China and U.S. will have public debt levels well above the average for the world. But the two largest economies in the world have capacities that many, that most other countries, do not have. So, the point is one size does not fit all. You have to go through the specifics of the country's circumstances if you want to give policy advice and if you want to evaluate public finance risks.

The second point that I want to stress is that there are no magical numbers. The numbers are a very good starting point for a conversation. They help structure the analysis, but there is no mechanical mapping between a number and a policy conclusion. That being said, Larry, I think it's clear that given the very strong response of fiscal policy to the pandemic shock, and the fact that some countries were clearly not able to respond to the same extent as others, the fiscal space, the financial capacity, was playing out during the pandemic. Buffers were used; in some cases, buffers were exhausted. Higher debt and deficits configure a situation where public debt risks are more pronounced. And so, in our view, the case for prudent fiscal policy is strong. The need to rebuild fiscal buffers is pressing. I could continue elaborating, but I think that you've got the general picture and we would go to Russia.

MR. MAURO: Sure. In fact, on Russia, I think our colleagues in the European Department are going to be better placed. We have on Friday morning; we have the regional outlook coming out. By the way, since I have the floor, just for those of you who follow these things, the number came out on inflation for the U.S. at 5 percent. And so that just reinforces the importance of our messages here on the role of fiscal policy in reducing inflation pressures and helping central banks not have to jack up interest rates as much.

MODERATOR: Okay, thank you. Could I just go to online, just take one or two questions from online and I'll come back to the room. I think we had Maoling from Xinhua. Can you connect her?

MS XIONG: Can you hear me?

MR. MOMBRIAL: Yes, go ahead.

MS XIONG: Thank you so much question for taking my question. I have two questions. First about poverty reduction. So, Vitor, you mentioned earlier that there is a reversal in poverty reduction because of the shocks. And the report says that by going to push the golden goal of eradicating extreme poverty by 2030 to the future. Could you share some thoughts on what policy makers should do in terms of how to deal with the situation?

Secondly, about China. So, China's debt to GDP ratio has been rising in recent years. You said that China might have bigger fiscal capacity, but do you have some recommendations for China's fiscal policy makers?

MODERATOR: Thank you. Okay, thank you. And I'm aware of time, so I'll read other questions that we are getting online.

Do you consider that in the current context a return to fiscal presence and discipline should be the role for eurozone countries?

MR. GASPAR: Thank you. The answer to your last question is yes. We have supported the return to fiscal rules in Europe. In September, last year, we actually put out our own IMF ideas concerning the reform of the fiscal governance in the Euro area and, perhaps, my colleague, Paolo Mauro, will want to elaborate on that.

On China, it’s very clear that the main challenge for China right now is the transition in its growth model. The rebalancing of growth in China from investment to consumption, from export to domestic demand, from goods to services, and that is the main priority for China and fiscal policy can help and should help this transition by, for example, offering more generous social safety net that will provide incentives for Chinese households to reduce their extremely high level of savings. But the role of fiscal policy in structural transformation in China can be illustrated in a very positive way by climate change.

China introduced, I believe in 2021, a emission trading scheme that rapidly became the largest carbon market in the world; and that is a very important contribution of China to fighting climate change at the global level. At the same time, the increase in importance of renewable energy in China has been beating all expectations year after year. At this point in time, the International Energy Agency believes that China will reach its contribution from renewables to the energy production mix that were set for 2030, already in 2025.

What does fiscal policy have to do with it? In the early stages, renewal energy was subsidized but the success in bringing down costs was so strong that those subsidies are being phased out, which is exactly in line with what should be the case.

So, in the area of climate, fiscal policy is being used in China to accelerate the transition and that type of use of fiscal policy will serve China well going forward.

You asked about poverty and that is a crucial priority. We believe that finance for development is crucial to tackle poverty. We believe that sustainable development goals require an overall approach to finance that includes poverty reduction. It includes health. It includes education. It includes, of course, climate change, and much else; and I believe that my colleague, Paulo, will also want to elaborate on that.

MR. MEDAS: Sure. I know we’re running out of time, so very quickly, on the eurozone and the fiscal roles speaker mentioned, we’ve been working with European authorities but also in our research, I’m thinking about what country should do when they’re rethinking their return to fiscal roles. So, many countries around the world suspended the rules at the height of the COVID to give flexibility to react to the shocks, and now how to go back to the rules, should they go back to the old rules or new rules, and what we stressed was three key pillars that the countries should think when they’re redesigning.

One, have a solid medium term fiscal frameworks that allow some flexibility to shocks, but send a very clear signal and they have a medium term anchor towards that sustainability and building buffers.

Second, strengthen the part on assessment of risks, of fiscal risks. So, the calibration of rules and the policies should be commensurate to the risks. High risk countries with high debt vulnerability should have a more ambitious fiscal path.

And the third point is really strengthen fiscal institutions. This includes transparency, fiscal transparency; and, for example, strengthen the role of fiscal councils. This will increase accountability in the framework and improve governance.

Just one, very quick, on the poverty and on the food insecurity. I think this is absolutely a priority for countries and they need to find the space to address these issues. And, again, I repeat, for low-income countries, really tax revenues are very low, so this is really an area to strengthen, to improve the fiscal space to react to this; and also, from the international community working together to address some of these issues, including addressing the conflicts that are undermining and exacerbating the food insecurity problems. Thank you.

MODERATOR: Okay. So, we have four minutes left. So, I’m going to do a quick speed dating. I’m sorry for the colleagues I won’t be able to take. If I can’t take you, please contact me after, we’ll answer the question; and, I think, the four people that have been raising their hands since the beginning, so if I can go to Doaa, David, the gentleman in the third row, and Heidi. Just keep your question to 30 seconds.

QUESTIONER: Okay. Thank you, Nicolas. My name is Doaa Abdelmoneim, Ahram Online from Egypt. I have two quick questions. During April, number of oil exporters announced a new cut in oil production. So, in light of the global oil price scene, how could it place further pressure on the developing countries’ budgets and fiscal policies management. My second question is the report showed that, for Egypt in specific, its debt is expected to be the highest in 2023 and 2024 among the developing countries before cooling in years beyond reaching a level under the 18 percent, 80 percent in 2028. So, what are the key drivers behind this forecast. Thank you.

MODERATOR: Please keep your questions short. They’re going to cut us off otherwise.

QUESTIONER: Heidi Giokos from ENCA, based in South Africa. I’m just curious to know what the implications are for South Africa’s fiscal health, given our energy crisis, which is called load shedding. So, the constant rolling blackouts, how this is impacting our fiscal health. Thank you.

QUESTIONER: Hi, David Lawder with Reuters. Good morning, Vitor. I just wanted to follow up on the inflation numbers from the United States, up 5 percent year on year. That’s a little bit lower than last month, which was 6 percent. You know, the market seems to like it, but core inflation is still pretty hot. Just wondering sort of whether this gives you any hope that we’re kind of coming to the top of the tightening cycle and this could start to take some pressure off of fiscal budgets, particularly for emerging market countries that, you know, have been suffering with high U.S. interest rates. Thanks.

QUESTIONER: Jeremy Warner, Daily Telegraph. You appear to have significantly revised up your projections for debt and deficits in the U.K. to levels which appear to be at odds with the Prime Minister’s pledge to have debt to GDP falling by the end of the Parliament. I wondered if you could give me a bit of detail as to why that is the case, and will it require further restraint in social spending and public sector pay?

MODERATOR: Thank you. Floor is yours, speed dating, one minute maximum.

MR. MAURO: Maybe I can go first in the order. There was a question on oil prices and the general message to countries is to reduce fuel subsidies in light of that. That’s a quick way of achieving savings. On Egypt, specifically, indeed, the goal is to reduce the debt ratio in the medium term, and the way to achieve that is to maintain primary surpluses above 2-1/2 percent of GDP. That’s the objective through more revenues and through reductions in spending that preserve support for the vulnerable.

MR. MEDAS: So, maybe be very quickly on South Africa. Yes, the problems on the energy sector there and the electricity company have an effect on the budget and the debt through two ways. One, indirect, because they affect economic growth, and they affect tax revenues. So, that undermines the fiscal accounts; and, direct, because the company requires government support and that is reflected in our projections for the debt numbers. So, the solution has to be to, obviously, address structurally the problems in the sector which will contribute to higher growth and reduce the need for future government support.

MR. GASPAR: So, thank you. I will address the question on inflation. As Paolo said before, the inflation reading at 5 percent shows inflation well above target; and, as you said, David, indicators of persistence point to a persistent process of inflation and that validates the spring meetings’ emphasis on the priority to inflation fighting for macroeconomic stability.

I will not comment on monetary policy at all but, I think, it’s very important to emphasize the role that fiscal policy can have in easing the burden on monetary policy.

By fiscal tightening, it’s possible to moderate aggregate demand and ease the pressure on policy rates; and, in the current circumstances, that is good not only for distributional reasons that are covered in the Fiscal Monitor, but also for financial stability reasons, be it domestic or global, which I believe, David, was the point that you were driving at.

When it comes to the U.K., the new budget in the U.K. includes two fiscal rules that apply with a 5-year delay. That’s a limit on the deficit of 3 percent of GDP and a constraint that states that public debt to GDP has to be falling by the end of the projection period, the 5-year period; and, according to the U.K.’s own Office for Budget Responsibility, these two rules are met narrowly at the relevant time frame.

The numbers that we put out in the spring meetings are different from national numbers. The national numbers focus on the public sector, while we have the international comparable general government, and the years are not the same for the U.K. The fiscal year applies, so it’s 2027, 2028, while we use calendar years.

We have not yet had the chance to go through the details and, so, I cannot give you the details that you ask for, but we’re, actually, quite impressed by the way the budgetary procedure, with an emphasis in the medium term is working in the U.K.; and what you see in the U.K. is that you have an increase in public debt ratios for a couple of years and then a stabilization of those public debt ratios followed if the governments and the OBR’s forecast prove correct, a decline in the public debt to GDP ratio. This path is fully reasonable as a way to managing public finance risks from a medium-term perspective. Thank you.

MODERATOR: Thank you, everyone. I’m afraid that’s all the time we have for this press conference. As I said, I’ll be standing in the room afterwards. Please come to me if you have more questions. We can also organize interviews after the press conference with some of them. If you want to find more information about the Fiscal Monitor, you can go on our website.

Just a reminder too that our Managing Director will have a press conference tomorrow morning at 8:30 a.m. We hope you can all make it, and we will have regional press briefings that can cover all the questions you may have on specific countries and IMF program. With that, you know, thanks, everyone; and, again, have a good day.