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The lack of proper mid-term deficit cuts plan in the U.S. and Japan as well as the uncertain global environment and weak growth prospects put hurdles on global fiscal consolidation, said the International Monetary Fund (IMF) on Wednesday in a newly-released report.
Strengthening fiscal balances and buttressing confidence remained at the top of the policy agenda, the Washington-based IMF said in its Fiscal Monitor report.
The IMF noted the average public debt ratio of advanced economies will remain at a historic peak in 2013 and 2014, about 110 percent of the Gross Domestic Product (GDP), or 35 percentage points above its 2007 level, although the budget deficits are narrowing and the debt ratio is expected to stabilize.
The IMF pointed out the shutdown of the U.S. federal government and the failure so far to raise the debt ceiling will add to uncertainty.
"Although a short period of government shutdown would likely to have limited impact, a longer period could be more damaging," and the IMF, adding "a failure to promptly raise the debt ceiling could have even more serious consequences."
Meanwhile, fiscal vulnerabilities are on the rise in emerging market economies and low-income countries, said the report.
As for the way to build fiscal buffer, the IMF said the potential for raising tax revenue can be "substantial" in emerging market economies while the room for many advanced economies is limited since tax ratios are already high.
