Business & Economy

Pound continues to slump after damning IMF statement

London, Sep 28 (EFE).- The pound continued to slump Wednesday after the International Monetary Fund criticized the United Kingdom’s new chancellor’s tax-cutting mini budget saying the fiscal deregulation would likely exacerbate the cost of living crisis.

Following the pound’s historic collapse on Monday, sterling fell Wednesday morning by 0.55% against the dollar to $1.06.

On Monday, it approached parity to the dollar, trading at $1.03, after Britain’s new finance minister on Friday published his economic policy which seeks to deregulate markets and cut taxes to boost growth by increasing national borrowing.

In a rare statement, the IMF criticized Kwasi Kwarteng’s budget late Tuesday saying “the nature of the UK measures will likely increase inequality.”

“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,” it said.

The International body added that it did “not recommend large and untargeted fiscal packages at this juncture.”

Kwarteng has defended his growth strategy and on Tuesday held crunch talks with London’s top financiers to try and calm markets after his announcement sent the pound and UK bonds into freefall. Kwarteng is expected to provide more details about the measures on November 23.

The IMF said the November deadline would give prime minister Liz Truss’ government an opportunity “to consider ways to provide support that is more targeted and re-evaluate the tax measures, especially those that benefit high-income earners”.

Kwarteng is to continue meeting with top bankers on Wednesday in a bid to reassure markets which have been in turmoil since Monday. EFE


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