IMF Warns France to Cut Debt, Sees Higher Deficit

IMF Warns France to Cut Debt, Sees Higher Deficit

Sub: Economy

Sec: Fiscal policy

TAG: Debt

Context:

• The IMF urged France to take more measures this year to reduce its debt load, warning that the budget deficit will be sharply higher than forecast in 2027.

More on news:

• The IMF said that France’s deficit will reach 5.3 percent of gross domestic product this year, slightly higher than the 5.1 forecast by the government.
• Consolidation measures are recommended over the medium term, starting in 2024 in order to bring debt on a downward trajectory, while making space for targeted growth-enhancing spending

About IMF:

• The International Monetary Fund, or IMF, promotes international financial stability and monetary cooperation.
• It also facilitates international trade, promotes employment and sustainable economic growth, and helps to reduce global poverty.
• It is a major financial agency of the United Nations, and an international financial institution funded by 190 member countries, with headquarters in Washington, D.C.
• The organization was formed on Established in 27 Dec 1945.

What is Fiscal Deficit?

Fiscal deficit refers to the shortfall in a government’s revenue when compared to its expenditure.

When a government’s expenditure exceeds its revenues, the government will have to borrow money or sell assets to fund the deficit.

What is Fiscal surplus?

• When a government runs a fiscal surplus, on the other hand, its revenues exceed expenditure.
• It is, however, quite rare for governments to run a surplus.
• Most governments today focus on keeping the fiscal deficit under control rather than on generating a fiscal surplus or on balancing the budget.

Difference Between debt and deficit: 

• The fiscal deficit should not be confused with the national debt.
• The national debt is the total amount of money that the government of a country owes its lenders at a particular point in time.
• The national debt is usually the amount of debt that a government has accumulated over many years of running fiscal deficits and borrowing to bridge the deficits.