The IMF calls on France to tighten its fiscal policy as of next year


“It is justified to start fiscal consolidation in 2023,” wrote the international organization, in a report on Monday.

After having spent billions to relieve companies and households from the energy crisis, France must begin next year to clean up its finances, recommends the International Monetary Fund (IMF) in a report published Monday.

Through the freezing of electricity and gas prices, energy vouchers, discounts on fuel prices, support for businesses… France has increased spending over the past year, estimated by the IMF at more than 2% of its GDP. These weighed on public finances already very degraded by the Covid-19 pandemic during which the government notably financed partial unemployment and the closures of shops under the “no matter what“.

After these two crises and when the aid linked to the pandemic faded, “it is justified to start fiscal consolidation in 2023“, writes the IMF in the conclusions of an economic assessment mission of France, known under the name of “article IV“. But this is not the path that Paris is taking, notes the Washington institution, noting that “the 2023 budget law does not target deficit reduction, postponing the fiscal adjustment to 2024“. The government is counting on a public deficit of 5% next year after 4.9% this year, and plans to return below the 3% mark in 2027, where its big neighbors are betting on a faster return to this level.

In its document published on Monday, the IMF, which is still counting on growth of 0.7% next year in France, fearsa slight widening of the deficitin 2023, citing the extension of energy measures and the continuation of the elimination of production taxes for companies. However, targeting energy aid could “largelyallow a fiscal tightening of a quarter of a point of GDP, calculates the IMF, also citing a possible postponement of production tax cuts.

In the longer term, the French deficit should remain above the level at which it stabilizes the debt, also anticipates the IMF which fears a widening of the gap “already importantwith comparable European countries. He calls for “a sustained fitto reduce the deficit to 0.4% of GDP by 2030 based on the reduction in the growth of current expenditure, in particular those linked to the pandemic and the energy crisis. The IMF is also emphasizing structural reforms, by raising the retirement age, completing the unemployment insurance reform, rationalizing certain expenditures (fossil fuels or housing), and that of the public service workforce.

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