IMF chief urges ‘coherent and consistent’ UK policies

WASHINGTON: IMF chief Kristalina Georgieva urged Britain and other nations on Thursday to ensure their fiscal policies remain consistent following reports that London is mulling more U-turns for its controversial budget plan.

Georgieva said she had a “very constructive” meeting with British finance minister Kwasi Kwarteng and Bank of England Governor Andrew Bailey during this week’s annual gathering of the IMF in Washington.

“We discussed the importance of policy coherence and communicating clearly so there can be no – in this jittery environment – there could be no reasons for more jitters,” she said.

The International Monetary Fund has stressed throughout this week’s meetings of finance chiefs the need to maintain fiscal discipline while central banks raise interest rates to control soaring inflation.

“Our message to everybody, not just to the UK, to everybody at this time: fiscal policy should not undermine monetary policy,” Georgieva said.

This would make the task of monetary policy “only harder and it translates into the necessity for even further increase of rates and tightening financial conditions,” she said.

“So don’t prolong the pain and make sure that actions are coherent and consistent.”

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Kwarteng sent shock waves through markets last month when he slashed taxes and froze energy prices in a bid to ease a cost-of-living crisis, a decision that raised fears of more debt for Britain.

The move forced the Bank of England, which has been raising borrowing costs, to jump into bond markets to help protect financial stability.

Since then, Kwarteng axed his proposed tax cut for the richest earners and brought forward his debt-reduction plans and economic forecasts to October 31.

The British pound rallied against the dollar on Thursday on reports that officials were discussing how to back away from costly tax-slashing measures.

While she called for consistency, Georgieva said it was “correct to be led by evidence so if the evidence is that there has to be a recalibration, it is right for governments to do so.”