IMF Asks Countries to Increase Public Investment for Economic Revival

International Monetary Fund (IMF) is pushing counties towards aggressive public investment to boost the economy from the negative impact caused by the pandemic across the globe. Fiscal Monitor Bi-annual report by IMF to analyse public finance across the globe- stresses the importance of the need to increase public investment. Increasing public investment will generate more employment directly between 2 and could strengthen confidence in recovery. Increase in the investment by 1 per cent of GDP can boost the growth by 2.7 per cent, private investment by 10 per cent and employment creation by 1.2 per cent after a period of 2 years, the report said.

According to report the key investment in demanding sectors critical to controlling the pandemic, such as health care, digital infrastructure, education and safe transportation is the need of the hour. Public investment becomes more necessary in the light where the private sector is under tremendous financial pressure due to slow down. The report also highlighted the need to boost the investment in adaptation to climate change specifically for countries which are prone to floods and droughts.

IMF advising the countries to choose investment project wisely due to pressure on borrowing and rollover risks. Gradual scaling up of investment by borrowing will pay off with raising additional revenue for priority investment.

"Poor countries – especially in the context of Sustainable Development Goals (SGDs) 2030- will need grant support from the international community", IMF report correlating the influence of public investment in inducing private investment by showing confidence in recovering economic fallout from the pandemic. In addition, the growth of sectors such as digital communication, electrification, or transportation infrastructure with public investments can stimulate private investment more directly. "Increasing public investment in advanced and emerging market economies could help (to) revive economic activity from the sharpest and deepest global economic collapse in contemporary history", the report added.