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Britain can afford to live with high debt ‘forever’, says IMF

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George Osborne’s obsession with reducing Britain’s debt mountain may do more harm than good, research by the International Monetary Fund (IMF) has suggested.

While advanced nations are facing some of the highest debt ratios since World War II, IMF economists cited research by Moody’s Analytics that suggested countries such as the UK, US and Canada could afford to live “forever” with relatively high debt shares compared with their pre-crisis averages.

The IMF paper, which was authorised by Olivier Blanchard, the Fund’s chief economist, showed that while countries such as Greece, Cyprus, Italy and Japan had a pressing need to reduce their debt ratios because of the risk that a financial shock could leave them shut out of the market, others such as Norway, Germany and the UK were deemed to be in the “safe zone”, where fiscal space was ample and borrowing costs were low.

In countries such as the UK and Norway which controlled their own monetary policy, the advantages were even bigger, the authors said.

 

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