The International Monetary Fund has become unusually keen for governments to spend more, contrary to its reputation for preaching austerity

John Robertson

PortfolioDirect

The International Monetary Fund has become unusually keen for governments to spend more, contrary to its reputation for preaching austerity. In a speech in France last week, IMF managing director Christine Lagarde urged governments to take advantage of low interest rates to invest. Lagarde highlighted a 20% shortfall in global investment spending in the aftermath of recent financial crises as the reason to raise spending commitments. Where fiscal constraints are more evident, investment could be fostered by reducing regulatory burdens, she said. Done properly, the resulting increase in GDP could possibly offset the rise in public debt, minimising the fiscal risks. In emerging market economies, reducing all capital spending inefficiencies by 2030 would provide the same boost to the capital stock as increasing government investment by five percentage points of GDP (or 14 percentage points in low income countries), according to the IMF head.


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John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...

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