The IMF also cautioned against fiscal policies that do not target specific populations, stating that the current plans will favor the wealthy rather than those who truly require assistance.
The International Monetary Fund (IMF) has criticized the UK government’s mini-budget, stating that the proposed tax cuts and expenditure will exacerbate inequality and undermine the Bank of England’s monetary policy.
Tuesday elicited strong commentary from a global financial institution over the contradictory government and currency policies aiming to boost GDP through tax cuts and curb inflation through interest rate hikes.
“Fiscal policy and monetary policy mustn’t conflict,” a spokeswoman said.
The IMF, whose views were shared by a former deputy governor of the Bank of England, also advised against fiscal policies that do not target specific groups.
“Given the rising inflationary pressures in several countries, including the United Kingdom, we do not suggest big, untargeted fiscal packages at this time, since fiscal policy mustn’t contradict monetary policy,” the spokesperson continued.
The organization stated unequivocally, “The nature of the United Kingdom’s initiatives is likely to aggravate inequality.”
“Consider more focused assistance”
It is the most recent criticism of the government’s choice to borrow money to support the largest tax cuts in fifty years.
The revelation caused the pound to fall to an all-time low, making imports more expensive, and increased the cost of government borrowing as gilt yields surged.
The IMF requested that the government consider providing more targeted assistance to families and businesses.
The IMF stated that Chancellor Kwasi Kwarteng’s budget plan announcement on November 23 alongside Office of Budget Responsibility projections would be an acceptable time to do so.
It would present an “early chance for the United Kingdom government to investigate methods to provide more focused help and reevaluate tax measures, particularly those that benefit high-income individuals.”
The IMF cautioned, “We are closely monitoring recent economic events in the United Kingdom and are in contact with the authorities.”
In the past, the IMF was required to intervene in British affairs.
During a financial crisis in 1976, the United Kingdom requested a nearly $4 billion IMF loan. At the time, IMF negotiators demanded severe cuts to public spending.
