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IMF: Governments need to focus fiscal support on vulnerable populations. Food prices increase the risk of social tensions

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Higher food and energy prices have increased the risk of social tensions, especially in low-income countries, which are already facing higher debt levels after the COVID-19 pandemic and rising borrowing costs, With rising interest rates, the IMF says in its latest report on global fiscal developments.

“The actions of governments to protect the vulnerable, in difficult situations, make a major contribution to maintaining social cohesion,” Vitor Gaspar, director of the IMF’s tax department, said in an interview with Reuters.

Gaspar said there was ample evidence that financial crises, pandemics and high price fluctuations could exacerbate social divisions and tensions, and fiscal policy had an important role to play in addressing those concerns.

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“It is absolutely imperative for public policies to ensure food security for all,” said Vitor Gaspar, who spoke in favor of targeted temporary measures, such as cash transfers, instead of large and widespread subsidies, which could be more expensive.

Gaspar added that poor households spend up to 60% of their budgets on food, compared to only 10% for an average household in advanced economies.

However, many countries do not have the financial strength to respond to the latest crises, after unprecedented interventions during the COVID pandemic increased global debt by $ 226 billion in 2020, the largest increase in a single year. year after World War II.

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The IMF expects global government debt to fall to 94.4% of Gross Domestic Product in 2022, after reaching a peak of 99.2% of GDP in 2020, and to stabilize at around 95% of GDP on medium term. But this level is 11 percentage points higher than before the pandemic.

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