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Business Times
5 days ago
- Business
- Business Times
Rich Britons may end up having to pay for the NHS, IMF warns
[LONDON] The UK should consider charging wealthy people to access its National Health Service (NHS) in order to help balance the public finances, the International Monetary Fund (IMF) said. 'Tough fiscal choices' will be needed over the next couple of decades as spending pressures pile up due to an ageing population, the fund warned in the final publication of its Article IV annual check on the economy. Universal free health care at the point of use is politically sacrosanct in the UK, where the state-run NHS enjoys widespread popularity despite long waiting times. Similarly, steep increases in the state pension enjoy strong support, yet the IMF said policy around at least one of the two areas may have to change. 'Unless the authorities revisit their commitment not to increase taxes on working people, further spending prioritisation will be required,' it said. 'The triple lock could be replaced with a policy of indexing the state pension to the cost of living. Access to public services could also depend more on an individual's capacity to pay, with charges levied on higher-income users, such as co-payments for health services.' The UK's so-called triple lock ensures that state pensions rise by the highest of either inflation, average earnings of 2.5 per cent. It has faced criticism for the fiscal burden imposed on the public purse, yet remains popular enough to have been protected by successive Conservative and Labour administrations. The IMF's analysis comes shortly after the UK's Office for Budget Responsibility made a similar warning about the unsustainable long-term trajectory of the public finances. Spending pressures are mounting but the government is struggling to raise taxes, already at a postwar high, or cut entitlements. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up The report praised the UK government for its attempt to reform welfare payments, yet these plans, originally intended to trim £5 billion (S$8.6 billion) of costs, were scrapped earlier this month after a rebellion by Labour Members of Parliament. The health and disability benefit bill is due to rise to £100 billion by the end of the decade, and the triple lock will cost £15.5 billion a year – triple the original estimate, according to the government's budget watchdog. Chancellor of the Exchequer Rachel Reeves will have to address these 'difficult decisions' and is already struggling with 'limited fiscal space', the IMF said. She is under immediate pressure to find fresh savings ahead of this year's autumn budget as higher borrowing costs, the welfare rebellion and a potential growth downgrade puts her fiscal rules in jeopardy. The task is complicated by weak growth, with the fund warning of 'significant challenges' to the government's growth and investment agenda in the face of rising global trade tensions. It threw its support behind Reeves' budget last October, saying it was growth-enhancing and hailing ministers' 'bold reforms'. But it left its growth forecast unchanged at 1.2 per cent for this year and 1.4 per cent in 2026. Fiscal rules Reeves could ease some of the fiscal pressure by increasing her buffer from its historically slim level of £9.9 billion, the IMF suggested. Alternatively, it could move to a system where compliance with her rules is assessed by the Office for Budget Responsibility only once a year, while two forecasts continue to be produced annually. The Institute for Fiscal Studies earlier this week rejected the second proposal, saying the government should instead bring forward existing plans to allow the rules to be missed by 0.5 per cent of GDP from Spring 2027. Specific fiscal targets should remain binding at the once-a-year autumn budget. That would end the current 'bad equilibrium' causing policy volatility and undermining efforts to deliver faster growth. Risks to growth are 'tilted to the downside' as tight financial conditions and rising household saving rates could 'hinder the rebound in private consumption and slow the recovery,' it warned. 'Persistent global trade uncertainty could also weigh on UK growth.' It added that 'after weakening in the second half of 2024, growth is expected to recover modestly over the course of 2025 and gain steam in 2026'. It estimated the underlying growth rate at 1.4 per cent. Reeves welcomed the report, which she said 'confirms that the choices we have taken have ensured Britain's economic recovery is underway, and that our plans will tackle the deep-rooted economic challenges that we inherited. Our fiscal rules allow us to confront those challenges by investing in Britain's renewal.' BLOOMBERG
Fibre2Fashion
22-07-2025
- Business
- Fibre2Fashion
Dutch economy faces trade tensions, elevated inflation: IMF
The Dutch economy is currently grappling with multiple challenges, including rising trade tensions and domestic policy uncertainty, according to the International Monetary Fund's (IMF) Article IV consultation. The Dutch economy faces challenges, including trade tensions and domestic policy uncertainty, with inflation remaining high and key bottlenecks. The IMF projects growth at 1.1-1.2 per cent in 2025-2026, driven by domestic demand. It recommends shifting fiscal policy from demand stimulation to supply expansion, boosting productivity, and managing green and demographic transitions. The economy is operating at full capacity, with inflation remaining elevated and critical bottlenecks in various sectors. Domestic demand is projected to drive growth, even as trade tensions affect momentum, with growth expected to reach 1.1 and 1.2 per cent in 2025 and 2026. While the IMF expects domestic demand to support growth, downside risks dominate, primarily due to escalating trade tensions and ongoing domestic policy uncertainty. The IMF's assessment stressed the need for urgent structural reforms, including a pivot in fiscal policy from stimulating demand to expanding supply. Directors concurred that fiscal policy should pivot from stimulating demand to increasing supply, given that real household incomes now exceed pre-pandemic levels, and the economy is operating at capacity amid elevated inflation. Productivity - boosting measures such as enhancing business dynamism, encouraging productivity - enhancing investment through improved access to finance for SMEs, and promoting productivity spillovers were also highlighted as essential for long-term growth. Furthermore, the IMF emphasised the importance of effectively managing the green and demographic transitions to ensure long-term growth and sustainability. The IMF stressed that while the Netherlands has demonstrated resilience in the face of recent shocks, tackling these structural issues will be crucial for maintaining its economic stability and competitiveness. Fibre2Fashion News Desk (HU)
Business Recorder
19-07-2025
- Business
- Business Recorder
PPI framework to be developed by end-June 2026: PBS
ISLAMABAD: The Producer Price index (PPI) framework will be developed by end of the current fiscal year (end-June 2026) and in-house work with the collaboration of the provinces has been initiated. This was revealed by sources in the Pakistan Bureau of Statistics (PBS) to Business Recorder. The IMF in its 11th September 2024 document titled Staff Report for the 2024 Article IV Consultation and request for an Extended Arrangement noted that it would provide a technical assistance to PBS given that 'important shortcomings remain in the source data available for sectors accounting for around a third of GDP, while there are issues with the granularity and reliability of the Government Finance Statistics. Q3FY25: Pakistan economy posts 2.4% growth The authorities are prioritizing addressing these weaknesses, supported by Fund TA on the GFS and a new PPI index and the PBS will soon begin fieldwork for four major surveys ahead of the upcoming NA rebasing to FY26.' According to a source in PBS, through PPI the entire price chain starting from farm gate/factory gate to retail outlets will become part of the country's statistical system. PPI will determine the cost of production at the factory gate/farm gate and the price paid by the end consumer. At present PBS monitors wholesale and retail price of products but through this index actual production cost at factory gate/farm gate will be noted. 'Through this index the production price received by farmers, prices at factory gate of locally produced goods and cost of imported goods at the port will be monitored,' the source said adding that through this Index it would be easy for the government to identify the role of middlemen and hoarders the source further stated adding that 'if there are discrepancies or unusual increase or decrease in the cost of production and the end consumer price the Government can easily detect the role of middleman by monitoring the trade and transport margin.' The PBS has already started work on change of base year of National Accounts from 2015-16 to 2025-26 – the selection of the base year made by the governing council of PBS that the national accounts be rebased after every 10 years. The PBS source further noted that the new base will be implemented by 2027-28. Theoretically a base year should be relatively calm and stable year. The PBS is the National Statistical Organization (NSO) and follows 2008 System of compiling National Accounts which are well documented and vetted by the World Bank, the source added. The PBS intends to will launch fieldwork for four major surveys (including the integrated agricultural census, labor force survey, and household integrated economic survey) in July 2024, from which preliminary results are expected to become available during FY25. Copyright Business Recorder, 2025
Zawya
15-07-2025
- Business
- Zawya
Mauritius' Economy Depends on Sustainable Public Finances
The island of Mauritius was once the native habitat of the dodo—a striking, flightless bird that went extinct in the face of unsustainable hunting by sailors. Today, the dodo is a national symbol for the country, representing the importance of conservation and sustainability efforts. Economies are also shaped by human action, including fiscal policy. Mauritius has a strong policy track record that has engendered a transition from an agricultural economy to a diversified upper-middle-income country. However, Mauritius now faces challenges from high public debt, significant public investment needs, low productivity, and an ageing society. To address them, fiscal policy would need to be recalibrated to preserve today's dodo: inclusive economic prosperity. Fiscal sustainability measures The Mauritian authorities recently announced their 2025-26 budget, which prioritizes reforms to support sustainable fiscal policy. These reforms aim to increase tax revenue by over two percent of GDP in 2025-26, while reducing government spending by over one percent of GDP in the same period. Overall, the authorities expect to reduce government debt from 87 percent of GDP in 2024 to 75 percent in 2030. Our recent annual economic health check of the island nation—our Article IV Staff Report and Selected Issues Papers —offers policy options to achieve sustainable fiscal policy in Mauritius, including (i) strengthening revenue mobilization, (ii) reforming the pension system, and (iii) increasing spending efficiency. The announced budget is in line with many of our proposed policy options. Increasing fiscal revenue Given that tax exemptions are high—they accounted for 4.6 percent of GDP in 2024-25—the new budget aims to discontinue selected exemptions from VAT and excise duties, such as those for construction, real estate, and electric vehicles. The budget also lowers tax payment thresholds and raises new taxes. The implementation and sequencing of these reforms would need to limit any potential adverse impact on economic growth, while also protecting the most vulnerable. Reforming pensions On the expenditure side, there is room to make pension spending more sustainable. Benefits paid to individuals through the Basic Retirement Pension program (BRP)—received by all Mauritians aged 60 and older—have more than doubled since 2019. On top of higher benefits, fiscal pressures are mounting from a relative increase in the number of pensioners. As society ages, Mauritius is expected to face a doubling in the old-age dependency ratio over the next thirty years, resulting in a fast-growing pension bill. Maintaining the present system would imply significant intergenerational redistribution from younger to older generations, as the (relatively small) younger cohort would likely face higher taxes to finance pensions for the (larger) older one. An option to help contain the growing cost of the BRP is a gradual alignment of the eligibility age from 60 to the official retirement age of 65. Given demographic trends, the alignment in the BRP eligibility age would help make the pension system more sustainable, while containing intergenerational inequalities and protecting the most vulnerable. The announced budget is a step in this direction. Spending efficiently There is also scope for streamlining broadly targeted and regressive fiscal transfers. Social subsidies in Mauritius, in many cases, reach relatively few poor individuals. For example, only 11 percent of beneficiaries of the social aid program are defined as poor. The announced budget proposes savings by gradually unwinding some broadly targeted subsidies. The resulting savings will help create fiscal space to finance targeted schemes for the most vulnerable, while making fiscal policy more sustainable. Unlike the dodo, now extinct, Mauritius' economy will continue to thrive so long as fiscal sustainability is secured. Distributed by APO Group on behalf of International Monetary Fund (IMF).
Business Recorder
15-07-2025
- Business
- Business Recorder
Policy mix to forestall boom-bust syndrome
EDITORIAL: The Governor State Bank of Pakistan while speaking at the launch ceremony of Women Entrepreneurs Finance Code stated that unlike in the previous boom-bust cycles the current policy mix is conducive to lasting rise in economic activity rather than a short-sighted, fragile and populist sugar rush. This observation is backed by an optimism displayed in the last four Monetary Policy Statements (MPS). It is significant that the 11 September 2024 International Monetary Fund (IMF) staff report for the 2024 Article IV consultations and request for an Extended Arrangement under the Extended Fund Facility noted that: 'Economic volatility has only increased over time, with a tight correlation between Pakistan's boom-bust economic outcomes and its macroeconomic policies. The repeated attempts to boost economic activity through fiscal and monetary stimulus have not translated into durable growth, as domestic demand increased beyond Pakistan's sustainable capacity, resulting in inflation and depletion of reserves, given a strong political preference for stable exchange rates. Each subsequent bust has further harmed Pakistan's policy making credibility and investment sentiment.' Tellingly, a detailed analysis by the Fund led to the conclusion that these cycles lead to recurrent balance of payment crises, and what the Governor would do well to note is that the discretionary monetary policy (an example being the demand for a low discount rate to jump-start private sector borrowing that in turn would raise industrial output and growth) induces boom-bust inflation cycles and significantly hinders economic growth. The 16 June 2025 statement issued by SBP maintains that 'the MPC anticipates the industry and services sectors to continue to drive economic growth in FY26. This assessment is supported by the sustained momentum in high-frequency indicators — including credit to private sector, imports of machinery and intermediate goods, and business sentiments — and easing financial conditions,' with higher imports a key component of the boom-bust cycle; and the 5 May 2025 statement making the same optimistic observation, 'incoming high-frequency indicators suggest that economic activity is maintaining momentum, as reflected by rising sales of passenger vehicles and petroleum products (excluding furnace oil), increasing electricity generation, and improving business and consumer confidence.' However, these sentiments are not backed yet by corroborating macroeconomic data particularly large-scale manufacturing sector's growth rate that registered negative 1.52 percent July-April 2025 against 0.26 percent in the comparable period of the year before. And while credit to private sector did double from the 323.5 billion rupees July-June 2024 to 676.6 billion rupees in comparable period of 2025 yet the Governor has not yet refuted claims by independent economists that the rise in private sector credit is linked not to the output sector but to the stocks and securities sector. The Governor further noted that the government and the apex bank remain steadfast in transitioning from recently hard-earned economic stability to a medium term economic transformation adding that this resolve is reflected in (i) prudent and cautious monetary policy though there is no consistency in the rationale provided while taking key discount rate decisions leading to the conclusion that the decisions are made by the IMF staff; (ii) fundamentals aligned exchange rate which has remained steady against the dollar even when the dollar plummeted against all major currencies after President Trump announced the imposition of tariffs; (iii) ongoing fiscal consolidation with sustained above 75 percent reliance on indirect taxes for revenue whose incidence on the poor is greater than on the rich; and (iv) improving debt dynamics which have certainly improved due to a reduction in the discount rate from 21 percent in June past year to 11 percent this year though total debt to GDP has risen to around 76 percent. It is concerning that structural reforms continue to focus on raising revenue primarily through raising tax rates rather than amending the inequitable, unfair and anomalous tax structure, reducing debt by lowering the discount rate (which requires IMF approval) and the 1.2 trillion-rupee circular debt retirement indicates lower interest costs due to the lower applicable discount rate rather than any other management or structural reforms. Debt rescheduling as a means to resolving sustained macroeconomic distortions and inefficiencies is unlikely to generate a lasting rise in economic activity and the focus must now shift to on well-defined structural reforms. Copyright Business Recorder, 2025
