I.M.F. Paints a Grim Picture for Richest Countries
At the China Development Forum, Beijing, it was clear that global economic crisis has even affected the wealthy nations of the world more than anticipated.
John Lipsky, the deputy managing director of the I.M.F. was speaking at the forum. Referring to U.S. he said, "a higher public savings rate will be required to ensure long-term fiscal sustainability,".
Further he added, "Addressing this fiscal challenge is a key near-term priority, as concerns about fiscal sustainability could undermine confidence in the economic recovery,” .
The countries who have big debts as well as deficits have been facing raised borrowing costs.
So wealthy countries will have to resort to many other changes like spending cutbacks, raised tax revenues, changes in health care and pensions etc.
He said, "fiscal consolidation should begin in 2011, if the recovery occurs at the projected pace,”.
To sustain the recovery, he added, "global rebalancing of savings patterns” will be required.
Mr. Lipsky asked governments to exercise caution against trying to use inflation to get over their debts. He said, "A moderate increase in inflation would have only a limited impact on real debt burdens, while accelerating inflation would impose major economic costs and create significant risks to a sustained expansion.” .
