Washington.- The International Monetary Fund said it will use revamped tools to assess countries’ debt sustainability and strengthen its method to set debt limits in its loan programs.
The commitment is part of a checklist prepared by the lender for finance chiefs from its 188 member nations meeting in Washington, in an effort to give the global recovery more traction. The document also says “many countries” need to spell out how they will reduce debt in the medium term.
“Lingering concerns over the future trajectory of public and private debt highlight the importance of durable fiscal adjustment and institutional reform,” IMF Managing Director Christine Lagarde wrote in the 13-page Global Policy Agenda released Saturday. “Even if stable, large deficits and high public and private debt reduce potential growth and leave economies vulnerable to shocks.”
Debt sustainability has been a key IMF requirement in recent loan negotiations in the euro region, becoming a sticking point with European creditors in the case of Greece and Cyprus. The fund said in the report it would also apply lessons from previous episodes of unsustainable debt when helping countries detect risks to fiscal sustainability.
“In its advice and analysis, the fund will seek the right balance between supporting growth — including through monetary easing — and removing the millstone of high private and public debt,” according to the document.