global economy

Governments should target scarce resources to new jobs – IMF

Agence France-Presse
Governments should target scarce resources to new jobs – IMF

An exterior view of the building of the International Monetary Fund, with the IMF logo, is seen in Washington, DC, on March 27, 2020. - Public investment should play a "central role" in the recovery of both emerging and advanced economies from the coronavirus downturn, the IMF said October 5, 2020 ahead of its fall meetings. Stepping up such spending with interest rates low globally could "create millions of jobs directly in the short term and millions more indirectly over a longer period," officials with the International Monetary Fund wrote in a blog post. (Photo by Olivier DOULIERY / AFP)


'Many countries will need to do more with less, given increasingly tight budget constraints,' says the International Monetary Fund's Vitor Gaspar

As demands increase on their limited resources, governments will need to raise taxes on wealthier families and firms and target spending away from protecting “old jobs,” the International Monetary Fund (IMF) said on Wednesday, October 14.

As countries continue to struggle with the economic damage inflicted by the COVID-19 pandemic, the IMF’s Fiscal Monitor report also urges policymakers to invest in job-creating projects like infrastructure and green energy.

Governments have injected a stunning $12 trillion into the global economy since the start of the pandemic, but now “many countries will need to do more with less, given increasingly tight budget constraints,” Vitor Gaspar, head of the IMF’s Fiscal Affairs Department, said in a blog post about the report.

As the recovery continues, policymakers “should become more selective and avoid standing in the way of necessary sectoral reallocations as activity resumes,” he and his coauthors said. 

“Support should shift gradually from protecting old jobs to getting people back to work,” by reducing measures like wage subsidies in favor of training to give people skills to find new employment. 

With low interest rates making borrowing easier, boosting public investment – beginning with maintenance and ramping up projects – can create jobs and spur economic growth.

Steps like a broad tax cut are “unlikely to be cost-effective” and would have limited impact on promoting growth and jobs, the report said.

A better alternative would be “to accelerate job-intensive public investments such as maintenance or public works.”

With public debt in many cases approaching 100% of gross domestic product, including in the United States, governments also may need “revenue-enhancing measures, including both increasing tax compliance and the progressivity of taxes on more affluent” firms that may have profited from the pandemic, the IMF said.

“The design of corporate income taxes to appropriately capture very high profits of firms in a rapidly changing economy, including those that made windfall profits during the crisis, can help finance priority areas.” –

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