IMF says Britain’s U-turn on economic plan signals fiscal discipline

WASHINGTON  -The International Monetary Fund on Tuesday applauded the new British finance minister’s decision to scrap most of a proposed debt-financed fiscal package, saying this signaled a commitment to fiscal discipline.

“The UK authorities’ recent policy announcements signal commitment to fiscal discipline and help better align fiscal and monetary policy in the fight against inflation. We look forward to the Medium-Term Fiscal Plan,” an IMF spokesperson said in a emailed statement to Reuters.

New British Finance Minister Jeremy Hunt on Monday scrapped most of Prime Minister Liz Truss’ proposed tax cuts and energy subsidies, saying it was “not right” to borrow money to fund them. His announcement sent the pound and British debt securities soaring.

The market reaction partly reversed a major slide in UK assets caused by Truss’ Sept. 23 so-called “mini-budget” which proposed major unfunded tax cuts, including for wealthy Britons. Truss last week abruptly sacked Kwasi Kwarteng, the finance chief who announced those tax cuts, replacing him with Hunt.

IMF Managing Director Kristalina Georgieva sharply criticized Truss’ original fiscal plan during the IMF’s annual meetings last week, admonishing Kwarteng and Bank of England Governor Andrew Bailey to ensure that UK fiscal and monetary policies do not work against each other in fighting inflation.