© Reuters. FILE PHOTO: The International Monetary Fund (IMF) logo is seen outside the headquarters building in Washington, U.S., September 4, 2018. REUTERS/Yuri Gripas/File Photo
By Andrea Shalal
WASHINGTON (Reuters) -Fiscal measures adopted by Britain will likely increase inequality, a spokesperson for the International Monetary Fund said on Tuesday, urging UK authorities to consider providing more targeted support to affected families and businesses.
“We are closely monitoring recent economic developments in the UK and are engaged with the authorities,” the spokesperson said, in response to a query from Reuters after the British pound hit an all-time low amid spiking market concerns.
“Given elevated inflation pressures in many countries, including the UK, we do not recommend large and untargeted fiscal packages at this juncture, as it is important that fiscal policy does not work at cross purposes to monetary policy,” the spokesperson said in the IMF’s first public reaction.
Britain’s new finance minister Kwasi Kwarteng sent sterling and government bonds into freefall on Friday with a budget aimed at growing the economy by cutting taxes and sharply increasing government borrowing.
Kwarteng responded by saying he would set out medium-term debt-cutting plans on Nov. 23, alongside forecasts from the independent Office for Budget Responsibility of the full scale of government borrowing.
The IMF understands that Britain’s “sizable fiscal package” was intended to help residents deal with higher energy prices and to boost growth via tax cuts and supply measures, but such measures could put fiscal policy at cross purposes with monetary policy, the spokesperson said.
Kwarteng’s Nov. 23 budget would provide an “early opportunity for the UK government to consider ways to provide support that is more targeted and reevaluate the tax measures, especially those that benefit high-income earners,” the spokesperson added.