Many developing countries in Asia must step up tax reforms because they face increasing borrowing costs as capital markets recover from the global financial crisis, the International Monetary Fund has said.
Speaking at the IMF’s high-level tax conference for Asian countries yesterday, the fund’s deputy managing director Naoyuki Shinohara said fiscal policy needed to focus on ‘rebuilding fiscal space’ through lower borrowing. Increasing tax revenues and cutting spending was vital to allow automatic stabilisers to work in any future crisis, as well as provide room for a discretionary fiscal response.
Shinohara highlighted that in most advanced economies, the pace of fiscal consolidation would slow in 2014 as the amount of average gross debt is stabilised.
However, among emerging market economies in the region, deficits remained significantly above pre-crisis levels as most countries had opted to postpone either spending cuts or tax rises, he said.
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