Via IMF (Den Internationale Valutafond)

Transcript of the Fiscal Monitor Press Briefing

October 16, 2019


Vitor Gaspar, Director, Fiscal Affairs Department

Cathy Pattillo, Assistant Director, Fiscal Affairs Department

Paolo Mauro, Deputy Director, Fiscal Affairs Department

Keiko Utsunomiya, Senior Communications Officer


Ms. UTSUNOMIYA: Good morning, everyone. Welcome to the press conference on
the Fiscal Monitor. This is Keiko Utsunomiya from IMF’s Media Relations
Office. With me today is Mr. Vitor Gaspar, the Director of the Fiscal
Affairs Department; Mr. Paolo Mauro, the Deputy Director of the Fiscal
Affairs Department; and Ms. Cathy Pattillo, who is the Assistant Director
of the Fiscal Affairs Department. We will have Mr. Gaspar giving brief
opening remarks, and then we will take questions from you, from the floor
and online.

Mr. GASPAR: That is a lot, Keiko.

Thank you all for coming to this press conference and for your interest in
fiscal policy issues around the world today.

Fiscal policy is at the center of economic policy debates today. In fact,
fiscal policy plays a central role in, for example, managing the
synchronized slowdown in the global economy, preparing for downside risks,
contributing to financial stability, financing the 2030 Sustainable
Development Goals, and, finally, in addressing climate change, which is the
topic of the Fiscal Monitor this time.

Major economies should be prepared for coordinated action in case of a
downturn. Moreover, inflation and inflation expectations are drifting below
target, and interest rates are negative in many advanced economies. Hence,
the time is now for countries with budgetary room to use it to support
aggregate demand.

In most other economies, however, monetary policy is not constrained.
Public debt and interest‑to‑tax ratios are high and rising. Therefore, we
advise policymakers to follow prudent fiscal policies, anchored by a
medium‑term framework. Otherwise, as often happened in the past,
complacency, fueled by low interest rates, will lead to over‑borrowing,
followed by investors’ panic and financial markets’ disruptions.

Sovereign bond yields are negative across the maturity spectrum in most
advanced economies. We are now deep into zero or negative territory.
Further decreases in policy interest rates are limited. This contrasts with
the situation just before the global financial crisis. In emerging markets
and low‑income developing countries, public debt ratios are high and
rising. The cost of servicing debt is also increasing, unlike advanced
economies, where low interest rates have compensated for high debt levels.

Some countries are vulnerable to exchange and interest rate shocks. In
China, the largest emerging market economy, we expect the economic slowdown
and fiscal stimulus to widen the deficit. We recommend that fiscal policy
helps dampen the negative impact on growth from trade disputes and that it
supports the long‑term rebalancing of the Chinese economy.

Fiscal policy has an important role to play in the development agendas of
many countries, which need to substantially raise spending to meet the
Sustainable Development Goals by 2030, particularly low‑income developing
economies. The spending must be framed in the context of a comprehensive
growth and development strategy. Building tax capacity is necessary to
enable the state to deliver on its functions for inclusive and sustainable
development. Efficiency in spending is a crucial aspect of good governance.
It is also necessary to ensure complementarities between public finance,
private investment, and Official Development Assistance.

Let me now turn your attention to the Fiscal Monitor on climate change. By
simply looking at me, you can notice a very important thing. I am holding a
leaflet. Why is it that I am holding a leaflet? Because the Fiscal Monitor
is now fully digital. It is fully paperless. And so, it contributes to
limiting global warming.

It is important to realize that current pledges under the Paris Agreement
are not enough. They will limit global warming to three degrees Celsius.
This is well above the safe level. To limit global warming to two degrees
Celsius or less, the level deemed safe by scientists, fiscal policy must be
mobilized, and governments and Finance Ministers need to take further
substantial action.

How much more? Each country would have to take measures that are as
ambitious as our carbon tax implemented now and rising to $75 per ton by
2030. Countries may choose to take other options. We discuss various
possible combinations of measures in the Monitor. Nevertheless, the $75
carbon tax provides one measure of the degree of ambition which is required
to deliver on the Paris goals.

What would this entail? 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. This
reflects the dominant role of coal in the production of energy in China and

The carbon tax would lead to higher prices for consumers. For retail
electricity, for example, price increases would vary from 2 percent in
France to 89 percent in South Africa. The average increase would be 45
percent. The differences largely reflect the role of coal in generating
energy in each country. The goal is to reshape the tax system and fiscal
policy more generally to discourage emissions. It is crucial that the
additional revenues from carbon taxation are used appropriately to reduce
burdens and make the reform more politically acceptable. The Fiscal Monitor
presents several options involving, for example, labor tax cuts, payments
to households, and public investment. And for a further discussion, please
do not forget to consult the Fiscal Monitor.

To wrap up, fiscal policy is at the center of the economic policy debate
today. In fact, fiscal policy plays a central role in, for example,
managing the synchronized slowdown in the global economy, preparing for
downside risks, contributing to financial stability, financing the 2030
Sustainable Development Goals, and, finally, in addressing climate change.

My colleagues and I will be happy to answer your questions. Thank you.

Ms. UTSUNOMIYA: Thank you, Vitor.

We will now take questions from the floor. Please identify your name and
your affiliation first, please.

QUESTION: Thank you very much. I am from Japan.

Mr. Gaspar, I am not going to ask you about climate change because I think
the debt is the more important issue. I think the debt‑to‑global GDP is
more than 220 percent. Do you have any update about the figures?

The second question would be, for the government, a low interest
environment is better because they have cheaper service costs, but do you
think the central banks will have a challenging moment in terms of their
independence? I will not give you an example because it is obvious. Some
countries are facing a very harsh attack on their central banks. Do you
think it is going to happen in other countries as well? Thank you very

Mr. GASPAR: Thank you for your very good two questions. The Managing
Director, whom you indirectly quoted, did refer to the fact that we do have
preliminary estimates of the global debt for 2018. And the headline number
is above 226 percent of global GDP. And that corresponds to a small
increase, relative to 2017, when the value was 225, but a much more
expressive increase, relative to what prevailed before the start of the
global financial crisis. So, debt levels in the world have continued to

In order to get the details that we have in our global debt database, you
will have to stay tuned for the presentation of the complete results from
the database that is scheduled for December. We will be updating the global
debt database yearly.

At this point in time, we already have some preliminary estimates.
Specifically, we have the aggregates for the world, for the G20, for the
G20 advanced, and for the G20 emerging markets. And that will give you
already a good picture of debt trends around the world. For example, you
will see that, for the G20 emerging markets, the number in 2007 was still
below 100 percent of these countries’ GDP, with 99.8. And according to our
preliminary estimates for 2018, we have now a number which is 190.1, so
almost a doubling in percentage of GDP in only slightly more than 10 years.

We also have the breakdown between public debt and nonfinancial private
sector debt. And what you see is that, while the nonfinancial private
sector debt has been flat or mostly flat during this period, public debts
have accumulated quite substantially for all country groups that I referred
to. And I believe that our COM department is in a position to provide you
with a table, with the numbers that I am quoting from in real time. So, you
can get it right away.

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I believe that these numbers are very relevant from a policy viewpoint, as
you were pointing to. On the one hand, because one has to be aware of high
levels of public debt. As I said in my introductory remarks, for most
countries around the world, where interest rates are positive and
significant, where debt levels are rising, and interest payments are
increasing as well, it is very important to conduct fiscal policy in a
prudent way and in the context of a medium‑ to long‑term fiscal framework
to guarantee that public finances are kept sound.

There is a link with a theme of the GFSR, which has to do with the
accumulation of nonfinancial corporate debt. And debt, we have shown in the
Fiscal Monitor some years ago, is a source of fiscal risks. In order for
countries to be able to manage appropriately fiscal crises, it is important
to have accumulated fiscal buffers.

I will not comment on your second question, on central bank independence.
But I have already said that the simple fact that interest rates are low is
not a good reason for complacency when it comes to public debt. Public
finance risks still have to be managed. And many times, in the past, risks
associated with the accumulation of public debt have been underestimated,
and that has led to sharp reactions in the markets and disruptive
adjustment processes in many countries.

QUESTION: Hi. I am from India.

Mr. Gaspar, in your comments, you mentioned about India and China, with
respect to the carbon tax that can be imposed to reduce the carbon dioxide
emissions. You also said that, in effect, this would lead to the end
customer seeing an increase in the tariffs that they would end up paying
for this power.

With respect to India, there are some structural issues with the pay the
power sector is structured in the country which does not allow, say, a
pass‑through of tariffs to the end customer. There are also issues with
respect to the distribution of power across the country.

You are advocating a higher carbon tax in your comments, but how would that
play out? And if not that, if you could throw some light on what other
measures could be taken to sort of reduce the carbon dioxide emissions

Mr. MAURO: Maybe I can take that question.

You raised the question of India, China. These are major players by now.
Obviously, they have grown spectacularly over the past two to three
decades. So, they are really key players not just in the global economy;
but, also, they are key players in the fight against climate change.
Indeed, it is important that one recognizes where they are coming from, to
think about how we can make progress.

I think the first thing that I will say is that, in the Fiscal Monitor, we
suggest that one way of increasing global ambition in the fight against
climate change is exactly to try to have an agreement among the key players
‑‑ and you have seen that chart that identifies India, China, the United
States, and others. An agreement starting with the countries that have the
largest emissions would be a way of kick‑starting more ambition in the
Paris process. Of course, there was a conference in 2015. There is going to
be another conference in 2020. As Vitor pointed out, a lot more ambition is

I think it is also important to think about the implications of climate
change for the individual countries. India, in particular, is very
vulnerable to climate change, both because a lot of its population is in
coastal areas, with cities on the coast. It has a very important
agricultural sector. It’s very exposed to extreme weather events.

The other thing to note is that a lot of people are dying today because of
local air pollution. There are some estimates, in the area of 400,000 to
500,000 people per year die because of local air pollution. This is from
respiratory diseases, heart disease, stroke, and so on. The World Health
Organization documents these facts. So, there is an incentive for these
countries to make a transition away from coal and away from other polluting
fossil fuels, toward green energy, not just for the next 20, 30 years but
also immediately. It is immediately relevant to save lives. We have some
numbers on the number of lives that will be saved in the report. I will
just say that 90 percent of these deaths that I mentioned are from the coal
sector. So that is something that, clearly, has to be looked at.

In the case of India, in particular, I will note that coal is actually not
especially cheap there. It is as cheap as it is in other emerging
economies. We have seen in other countries that solar, wind has now become
as cheap as coal. The trick there is to increase scale. The more solar
panels we produce, the more economies of scale, the cheaper it becomes. And
both India and China have very clever, very experienced engineers who can
certainly work on that transition. So, I am really hopeful that a change
can be made.

In terms of the policies, we go through the policies in the report. There
is carbon taxation, but there is also emissions trading, permits systems.
There are feebate. There are regulations. So, there are a whole range of
measures that can be taken. In the case of India, I think about the excise
tax on coal which already exists; and if one were to scale that up, that
would be a very good starting point. But, of course, one has to do a
package of measures. It is not just a matter of introducing one measure.
One can introduce a tax, take the revenue from there, and redeploy the
revenues to transfers. And we know that, in India, those are very much used
already. Public works programs, the clean‑up of mines, building new
hospitals. There is a whole range of ways in which those resources can be
redeployed to have a package of measures that is both economically
efficient and politically and socially fair.

So, I will stop at that point, but this is a very, very good beginning of a

QUESTION: I was wondering if the IMF is concerned that some administrations
nowadays deny climate change as a big issue or, in some cases, as any issue
at all and if that could impact the discussion about carbon pricing and
what message the Fund would send to these administrations.

Mr. MAURO: Well, I think everybody has to play their part. And it is
important that one thinks about ways of coming to an agreement, both
domestically and internationally on how we make that transition.

I have mentioned already that, in the domestic arena, there are ways of
having packages that dissuade people and firms from using coal and other
polluting fossil fuels, reduce the use of energy. And at the same time, we
can support those communities that are mostly impacted by the transition.
For example, governments can take some revenues and redeploy them to
support coal mining communities, cut other taxes, provide transfers to the
lower‑income segments of the population. So, there are ways of helping the
domestic process.

Internationally, again, I think a good way of starting the process is to
have the big players talk amongst themselves. If some countries are
reluctant to come to the table, there are proposals out there in the public
debate. Right now, there is a lot of discussion about border tax
adjustments. There are some countries or groups of countries that say,
well, if I introduce a carbon tax and you do not introduce a carbon tax,
then I am going to impose an adjustment on the taxation of imports from
your country so that businesses compete on an equal footing within my
economy. So, there are ways for the international community to come
together, and we are very hopeful that this process can get started.

QUESTION: Hello, Paolo, Cathy, Vitor, and Keiko. I work in the state
television in Cameroon. I have two questions.

Cameroon does not have a strong culture of monitoring economic growth
alongside its financial policies. Now, the question I want to know is: What
do you do to encourage governments like mine to continue monitoring its
fiscal policies? And if this can ultimately help sustain growth? Because,
since the 80s, we have the feeling that all indicators are down.

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When we also talk about sustainable development growth, can efficient
fiscal policies help us to attain this ultimately, given the fact that the
SDGs ‑‑ most countries could not make it?

Ms. PATTILLO: Thank you. Your question focuses on the need for strong
fiscal policy and strong institutions then that can help your country and
other developing countries then achieve their Sustainable Development
Goals. It is something that we have been working very much now with
countries on.

The first thing I would point out is that, for countries to achieve their
development goals, they really need to have full ownership of the
development strategy, of their development strategy. And that could include
then setting these development goals as part of government objectives. And
that would speak to your point about the importance of monitoring. Only if
you include objectives then in your policy do you have then an incentive
then to monitor progress towards them.

At the heart of achieving these development goals is strong and sustainable
inclusive growth. And there, there is really a need for financing, and that
is both on the public side and the private side. We have done work on
looking at the costing then for countries to achieve their Sustainable
Development Goals. And the estimates are around 15 percent of GDP, higher
in sub‑Saharan Africa because of the younger populations and the need for a
lot of education spending. So, to make that complementarity work between
the public financing and the private, you really need comprehensive
governance reforms, a strengthening of the business environment. There are
a lot of things that could help. In sub‑Saharan Africa, there is the G20
Compact with Africa that could be a catalyst.

And then back to fiscal. Really, at the heart is the imperative of raising
the capacity for domestic revenues, for domestic tax. And that goes hand in
hand then with building the capacity of the government overall. And that
means then broadening the tax base, enhancing tax administration. I know
these are priorities, particularly in Cameroon, where increasing non‑oil
revenue is a priority then of the government.

In addition to the tax side, also, there is a real need to strengthen
public financial management, transparency, accountability, the composition
of the budget. These are all, again, steps that are going to help with the
monitoring then of these development objectives that the government has.
And, of course, then cooperation across all stakeholders ‑‑ donors, private
sector, governments, us ‑‑ is important.

Mr. GASPAR: Telegraphically from me. I want to add two things very briefly.

One, I will call your attention to slide No. 4 of my presentation, where
the results from the costing exercise that Cathy referred to are presented
and displayed in a way which I find visually very appealing. Look it up and
see if it works for you.

The other thing, I want to amplify something that Cathy said, which is the

When we are talking about a country like Cameroon, where, indeed, the
tax‑to‑GDP ratio is very low, it is important, it is crucial, it is
decisive to build up tax capacity in order to enable the state to fully
play its role in sustainable inclusive growth. This is just a repetition,
but I believe it is an important repetition.

QUESTION: I am from the China media group. As we know, for fighting climate
change, the Chinese Government already took a lot of measures and got some
good results. So, from your view, what can China do to fight against
climate change further? And what is your assessment of China’s fiscal
policy? Thank you.

Mr. MAURO: Well, I think that, like other countries, China has made a very
important start and has some commitments that were taken in 2015 in Paris.
We have the numbers in the Monitor. I think, like for many other countries,
the issue is just stepping up, doing more. And I am sorry that we always
ask for more; but I think in this case, it is truly needed. China is really
a key global player. It can really lead the way.

As you saw in the exercise that we did, not surprisingly being the second
‑‑ or one of the two largest economies globally, China has a huge role in
this endeavor. Again, we have this example. If there was an increase
globally of the carbon tax to $75 per ton by 2030, then more than half of
the reduction in emissions would come from China. And that tells us that it
is so important to have leadership from China, together with other major
players. We are hoping that there can be an agreement among the countries
with the largest emissions at this point.

So great work. And we all need to do more.

Ms. UTSUNOMIYA: The assessment of fiscal policies in China. That was your
second question.

Mr. GASPAR: On the Chinese fiscal policy, I also interpret your question as
focusing on fiscal for climate change. I covered that in my initial remarks
by saying that we at the Fund believe that fiscal relaxation, which was
followed by China in the recent months is appropriate to smooth the impact
from trade disputes. We very much welcome the rebalancing of fiscal policy
‑‑ better said ‑‑ the contribution that fiscal policy makes to the
rebalancing of the economic growth model of China, especially where, by
increasing the purchasing power of consumers, it fosters the move from
exports to domestic demand and from investment to consumption, which is
part of the transition of the growth model in China. So, we are basically
saying, in a nutshell, that we do see that fiscal policy can play a role in
stabilizing the growth path of the Chinese economy in the short run; but it
should, at the same time, contribute to a sustainable, inclusive growth
model for China. And that implies that fiscal policy should be contributing
to the transformation of the Chinese economy and society.

QUESTION: Good morning. I will speak in French.

[Through interpreter]

Good morning, everyone. I am from Tunisia. And coming back to our continent
after Cameroon, I heard Cathy talk about the concretization of fiscal
measures, in particular, and about how to improve the fiscal capacity of
emerging economies.

Today, the case of Tunisia is that we have been having problems since 2011,
since the Arab Spring. And we were wondering, what can we do in concrete
terms to reduce debt, in particular, public debt in Tunisia, which is going
to reach 89 percent of GDP, with a budget deficit of more than 5 percent
versus 9 percent, which was expected for 2019. So how can you help Tunisia
deal with all of these difficulties?

Mr. MAURO: ‑‑ that is on the debt. And I am going to try to say a few words
about the developments in the debt, in the deficit, as you mentioned, and
also to give a sense of what we see as the main fiscal priorities. And, of
course, the Fund is supporting Tunisia through an Extended Fund Facility
(EFF). So, certainly, we are very close to that discussion of policies.

You pointed out the high debt. Indeed, the key priority is to stabilize it
and to gradually reduce it. We are not at 80 percent this year. We are a
little lower. The forecast for end‑2019 is 74 or 75 percent of GDP.
Personally, for the purpose of this discussion, I do not focus so much on
the changes from year to year in Tunisia because so much of the debt is in
foreign currency; and, therefore, changes in the dinar have a big impact on
the debt‑to‑GDP ratio. But I focus on the deficit. And I note that the
deficit, which used to be almost 6 percent in 2017, is projected to be 4.4
percent of GDP for this year. So, there is a decline, and that is in the
right direction. The objective is to make sure that, as you started from,
we let the debt‑to‑GDP ratio gradually decline over time, in the next few

The way that the improvement in the deficit, the reduction in the deficit
has occurred has been to reduce the wage bill in the public sector, to
reduce some subsidies very gradually, and revenue mobilization, in

Going forward, the challenge is to continue reducing the deficit while
increasing social spending and increasing infrastructure. We also look at a
potential continuation of the process of pension reform. That is important.
And the state‑owned enterprises are another priority to make sure that
there are no fiscal risks coming from that area. So those would be the
broad priorities for the country.

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QUESTION: Thank you for taking my question. My name is Simon from Today
News Africa Washington, DC.

First, in sub‑Saharan Africa, could you throw more light on the fiscal
policy situation or recommendations on some of the big countries: Nigeria,
South Africa, Ghana, Ethiopia?

And finally, climate change is one of the biggest issues facing Africa
right now. We see the situation around the Lake Chad Basin, where we have
60 million people at risk of starvation. What recommendations do you have
for fighting climate change? And what type of cooperation do you have with
the African countries that say that the biggest polluters are actually in
the west and Africa suffers the consequences? Thank you.

Ms. PATTILLO: Since you mentioned a number of countries, I am going to be
very telegraphic then on points. And, of course, those countries are large
countries and then with a lot of potential then of leadership then in the
continent. So, the policies there are very important.

On Nigeria, the priority is a comprehensive reform to durably increase
non‑oil tax revenue, again, that Vitor underscored. And there are a number
of reasons. Of course, this will contribute to providing then space for
important spending on infrastructure and on human development spending,
social spending. And for Nigeria, that is very important for a couple of
reasons. One, because right now, interest payments as a share of tax are
very, very high, around a third for overall and two‑thirds for the Federal
Government. And that is not because interest payments are particularly
high. It is because the denominator is incredibly low. Nigeria has one of
the lowest tax ratios in the world. And it is not then because Nigeria does
not have big development problems, development challenges. Nigeria also
will have a lot of needs then for education and health spending. It has
some very low indicators in that area. And with the demographic
projections, Nigeria is actually projected to be, by 2050, the third most
populous country in the world. So, addressing those challenges is really

For Ghana, similarly, the priority is sustained fiscal adjustment and
transparent financing to reduce large financing needs and anchor the debt
dynamics. So right now, Ghana is in the process of getting ready for the
2020 budget. And we welcome then that they are committed to the budget
deficit of 5 percent. This is going to be an election year in Ghana. So,
meeting that budget target in 2020 will really send a strong signal to all,
including investors, of the government’s commitment to fiscal discipline.

For Ethiopia, Ethiopia has challenges relating to debt sustainability, but
they have just released a new homegrown economic reform program that we
very much welcome. And we are looking forward to working with the
authorities on that reform program that will, again, then provide the space
for social spending and maintaining good quality infrastructure spending.

Finally, on South Africa. In South Africa, there is really a need to move
beyond business as usual to boost growth. So, there is a need for urgent
reforms to stop the decline in per capita GDP and to build jobs. There is
also a need to overhaul the power utility ESCOM. And there, really a
gradual but sizable consolidation is needed to stabilize debt at lower
levels. This would reduce financing costs. In South Africa, the public debt
has doubled over the last decade, and it is set to increase over the next
20 years or so on business as usual. So, this gradual fiscal consolidation
should really prioritize growth‑friendly and inclusive measures.

Mr. MAURO: Maybe I could complement from the perspective of climate change.

As you correctly pointed out, the African continent is very exposed to the
effects of climate change. On the other hand, it is not yet a contributor.
When you look at some of the numbers in the Fiscal Monitor, the emissions
are not really coming much from Africa. That may be the case later on in
this century but not yet.

There are a few instances ‑‑ Cathy mentioned the case of South Africa. You
will remember the number that Vitor gave. An 89 percent increase in
electricity prices in South Africa, if we were to have a large carbon tax
‑‑ well, again, part of the reason is that there is a lot of coal used in
South Africa.

So, yes, everybody has to do their part. There are some countries that can
contribute to reducing carbon emissions significantly. But I do not think
at the global level, this is where the real action is going to take place.

That said, there are important decisions to be made today for which kinds
of infrastructure are the continent going to choose. And decisions that are
made today will have implications for decades to come. So, it is important
that as African countries choose the mix of infrastructure projects, they
choose green types of energy. And in the transportation area, again, they
can maybe choose rail, as opposed to roads. But I think it is not sort of
crucial at this moment.

The other aspect I would like to draw your attention to is, there is an
annex in the Fiscal Monitor that looks at the revenues from natural
resources. And you will notice, when you go through that annex, that global
prices of oil, gas, and so on, have major implications for whether some
African countries are going to be able to develop new fields. So, the
future revenues are impacted by the developments of global prices which, in
turn, are related to whether there is a big change in how we use power
globally. So, there are implications, again, for African countries that are

Ms. UTSUNOMIYA: You get the last question.

QUESTION: Vitor Gaspar, allow me to do a question about Brazil as far as
fiscal numbers, if you will allow me.

According to the statistical annex from the Fiscal Monitor, the primary
surplus of Brazil is just going to [wrap] in 2023, not 2022, as was
estimated in April.

Also, that kind of stabilization of the public debt, growth of the public
debt in 2022, even though the net public debt increases, even though in a
slower way. What are the factors? What are the assumptions behind those
numbers? For instance, the social security reform, what are the variables
behind that? Thanks so much.

Mr. GASPAR: I would be quite happy to engage with you bilaterally on the
details. At this point in time, we are slightly over time already, so
details are not in the order of the day but let me give you a general

I think that when we look at Brazil right now, there are a number of very
promising developments. You have been following economic evolution in
Brazil very closely for many years. In how many of those years could you
say inflation is coming significantly below target? That is a very
promising development in Brazil, and it does have ‑‑ potentially, at least
‑‑ far‑reaching fiscal implications in terms of public debt management and
other important variables.

The other aspect is that I believe ‑‑ you will correct me if I am wrong ‑‑
that every time that we had a press conference like this one, you would ask
me about social security reform in Brazil, and the prospects would be
always uncertain.

As you well know, at this point in time, it does look like the social
security reform in Brazil is in train to pass. If you look at the quality
of public finances in Brazil, that is a very important contribution. And as
in other countries ‑‑ and Cathy referred to that repeatedly ‑‑ the
structure of the budget makes a tremendous difference for sustainable
inclusive growth, and that is the case in Brazil as well. But in the case
of the path for the deficit, the primary deficit and public debt, the
spending ceiling in the constitution is the driving force. The social
security reform that you referred to is very important for the composition
of the spending and the other factors that I referred to.

Let’s pursue this conversation bilaterally.

Ms. UTSUNOMIYA: Thank you very much for your participation. This will
conclude today’s Fiscal Monitor press conference. Thank you and see you
next time.

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