IMF abandons public debt concerns and calls on governments to invest

The IMF has issued a rallying call to rich countries around the world to increase public investment as the best way to encourage a strong economic recovery from the coronavirus pandemic.

Advanced economies should not worry about debt, but instead take advantage of historically low borrowing costs to increase spending on infrastructure maintenance immediately, the IMF said in a report published on Monday.

They should also prepare plans for subsequent new capital spending on digital infrastructure and green technology, it said in a chapter of its semi-annual Fiscal Monitor.

The report marked a complete reversal of the fund’s normal concerns about public finances in rich countries.

Speaking to the Financial Times, Paolo Mauro, deputy director of fiscal affairs at the IMF, said the high level of uncertainty in the global economy strengthened the case for increasing public investment.

“You get a bigger bang for your buck from public investment because investment by private firms is extremely low,” he said.

Many countries have already begun to increase spending in response to the economic damage caused by the pandemic. The EU’s €750bn recovery fund is designed to reconstruct the continent’s stricken economies, while the UK is planning rapidly to increase public investment…

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