The International Monetary Fund has warned that long-term fiscal reforms will be required among advanced economies as it projected the UK’s gross debt to gross domestic product would rise to 90.6pc in 2015.
The Washington-based fund said that while some countries – including the UK – had made a start on the reform process, more action would be needed to address the “formidable challenge” of reducing debt ratios over the coming years.
It said the UK gross debt to GDP ratio would more than double by 2015 from 44.1pc in 2007. In the US it forecast a rise to 109.7pc from 62.1pc over the same period.
“Fiscal policy will need to react more strongly to debt than past behaviour would suggest, and governments will need to engage in reforms that place debt on a sustainable footing,” the IMF said.
“In the last three and a half decades, public debt has been the shock absorber in advanced economies – going up in bad times and not coming down in good times.”
It said in a report that the fiscal challenges facing advanced economies would require “growth-friendly structural reforms”, involving gradual adjustment, stronger fiscal institutions, and spending and revenue reforms.