IMF praises UK debt plans as G7 exception ahead of Budget

Senior IMF officials have publicly praised UK plans to reduce borrowing on three occasions in the past 24 hours, presenting Britain as a singular exception among the G7 group of advanced economies. Speaking at the fund's annual meeting in Thailand, managing director Kristalina Georgieva said the UK had acted decisively to cut debt and the deficit and was "enjoying a bit of a better growth prospect" as a result. Chief economist Silvana Tenreyro also told the BBC that UK borrowing reductions "stand out". The comments mark a notable shift for a country that has frequently carried the highest borrowing rates in the G7.

According to the BBC's Faisal Islam, the UK has spent much of the past half decade on the bond market's "naughty step" since the Liz Truss mini-budget, as political and economic crises afflicted successive governments. The IMF, which acts as a global financial watchdog, is using the meeting to warn about the debts of the world's largest economies. Meanwhile, finance ministers from former crisis countries have been highlighting how little their own borrowing costs have risen compared with major economies such as the US.

The recognition arrives ahead of a UK Budget in a fortnight, and it points to the kind of fiscal plan likely to follow. To keep debt reduction on track, the chancellor is expected to have limited room for extra spending while also wanting to keep tax rises contained, the BBC reports. The margin for error around meeting the government's debt rules — the so-called headroom — could fall modestly.

Any reduced headroom would probably be tied to building a cushion against an expected rise in energy prices caused by the ongoing conflict in the Middle East and its knock-on effect on the cost of living, described as a global inflation shock. That would likely mean disappointment for public services hoping for cash injections to cover rising inflation, an expectation raised this week by the think tank the Institute for Fiscal Studies. Public sector pay negotiations are also expected to be tough.

The BBC reports the chancellor is likely to lean into the IMF's framing of a government with austere plans relative to other advanced countries, even if the outcome falls short of "austerity". The immediate advantage is to escape the full glare of bond markets, whose attention has shifted to countries such as France. The bigger potential prize is lower relative borrowing costs for the government and for households — though, as the BBC notes, forecasts are worth little without solid plans underpinning them.