The Wall Street Journal
March 22, 2010

  • A d v e r t i s e m e n t
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The International Monetary Fund on Sunday urged countries, particularly those with advanced economies, to pare their fiscal deficits and debt to prudent levels by carrying out pension and health entitlement reforms.

IMF First Deputy Managing Director John Lipsky said in remarks delivered in Beijing that high public debt and fiscal deficits have already raised the risk premium for several countries, and could lead to higher interest rates and slower economic growth in the medium term.

“We have estimated that maintaining public debt at its postcrisis levels could reduce potential growth in advanced economies by as much as 0.5 percentage point annually compared with precrisis performance,” he said. “For most advanced economies, including several of the largest, maintaining fiscal stimulus in 2010 remains appropriate, but fiscal consolidation should begin in 2011, if the recovery occurs at the projected pace,” he said.

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