By Yakubu LAAH InvestAdvocate
Lagos (INVESTADVOCATE)-Global unemployment rate currently exceeds 200 million people and an additional 13 million people are expected to be unemployed by 2018, the International Monetary Fund (IMF) said in its Fiscal Monitor Report on Wednesday.
Vitor Gaspar,head of IMF’s Fiscal Affairs Department, said to address this and other issues such as debt level requires smart fiscal policy.
In terms of unemployment, he said the most worrisome is youth unemployment. “There are examples of advanced economies in Europe where youth unemployment surged above 50 percent,” Gaspar said.
According to him, in several developing economies, job creation does not absorb the large number of young workers entering the labour force every year, which he says puts unemployment at the top of the global policy agenda.
“Faced with this immense challenge, we asked ourselves: “Can fiscal policy do more for jobs?” That is the theme of the October 2014 Fiscal Monitor,”he added.
Gaspar affirmed that support to employment and economic growth requires action on multiple fronts. “In some countries, particularly in Europe, reform of labour markets may be necessary to remove persistent rigidities,” he noted.
“Fiscal policy cannot substitute for such reforms. But fiscal policy can work in tandem with broader structural reform efforts to support job creation. The Fiscal Monitor highlights three possibilities,” the IMF head of Fiscal Affairs Department said.
These includefostering macroeconomic conditions that are supportive of economic activity and labour markets and facilitating structural reforms in the labour market by offsetting the potential short term economic costs of reform.
The third is being part of the overall design of structural policy measures.
According to Gaspar, in advanced economies, a carefully designed reduction in employer social security contributions on young workers can improve youth employment.
He says in emerging market and developing economies, removing tax barriers, providing basic public services, and offering greater access to finance and training can help address challenges related to informality and low growth in labour productivity.
On the part of debt sustainability, Gaspar said in advanced economies, debt levels are stabilizing but remain elevated. “In some cases, debt exceeds 100 percent of GDP. So it is important to bring government debt down to safer levels,” he affirmed.
While in emerging economies, the IMF’s head, Fiscal Policy says deficits and debt ratios are generally moderate, but still remain above pre-crisis levels.
He noted that in some cases, there are risks to debt sustainability from off-budget transactions and government guarantees. “Many of these economies share the need to raise potential growth while rebuilding the fiscal buffers used during the crisis,” he said.
