IMF calls for fiscal restraint in year with most elections ever

The International Monetary Fund pushed nations on Wednesday to rein in fiscal spending and recreate their buffers, but said that could prove to be tough in the world’s hugest-ever election year. A record 88 nations, abode to exceeding than half of the world’s population, have held or are holding national elections in 2024, the IMF conveyed, noting that governments tend to splurge more and tax less during election years.

“The most dangerous risk to public finances increases from the record number of elections being held in 2024, which has led to it being dubbed the ‘Great Election Year,'” the IMF said in its new Fiscal Monitor publication. The United States will hold its presidential election in November, while voters in India will start voting later this month. Taiwan, Portugal, Russia and Turkey have already held elections.

The IMF said budget overruns were often likely in election years, a risk amplified by raised demand for social splurging. It said deficits in election years tended to exceed forecasts by 0.4 percentage points of GDP, compared to non-election years. Slowing growth prospects and still-high interest rates would further constrain fiscal space in most economies, it revealed.

Emerging market economies and growing economies could increase tax revenue by polishing their tax systems, expanding their tax bases and strengthening institutional capacity – which together yield as much as an additional 9% of GDP, the IMF said.

Without decisive attempts to cut down deficits, the IMF said public debt would go on to increase in several nations, with global public debt projected to approach 99% of GDP by 2029. The rise will be driven by China and the United States, where public debt is anticipated to rise beyond historical peaks.