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IMF warns of risks to Finland's general govt finances

20 Nov 2019, 04:18 ( 21 days ago) | updated: 20 Nov 2019, 10:26 ( 21 days ago)

DF Report
File Photo Xinhua.

A statement of the International Monetary Fund assesses Finland’s fiscal policy and financial markets, in which it warns of risks to Finland’s general government finances, said a press release issued by the Ministry of Finance.

IMF notes that the objectives set out in Finland’s Government Programme are ambitious and deal with issues important for the economy.

It also considers the loosening of fiscal policy in 2020 to be good for growth. However, IMF warns the Government about the risks to general government finances in the medium term. It points to the challenge of getting the Government Programme implemented.

IMF in its statement said the growing demands of healthcare and social welfare services emphasise the importance of achieving a fiscal balance.

It also states that fiscal buffers are necessary to ensure that the social welfare model can be preserved. If the global economy weakens beyond expectations, this, says the IMF, will increase the risks to Finland’s general government finances.

In IMF’s view, effective employment measures are available, but these should not be allowed to increase general government costs in order to ensure a fiscal balance.

Minister of Finance Mika Lintilä said IMF has highlighted precisely the difficult issues that the government is very familiar with.

“The Government Programme is demanding. It is clear that the cornerstones are a fiscal balance, a restructuring of health and social services and raising the employment rate. These will not be achieved automatically, but require determined action,” said Lintilä.

IMF is also concerned about the continuation of household indebtedness. It welcomes the measures proposed by the working group of the Ministry of Finance and stresses the need to curb borrowing by housing companies.

IMF's executive board will discuss the country report on Finland in early 2020, along with a separate report on the equality impact and effectiveness of Finland’s taxation system and social security system.

IMF issues corresponding statements about all its member countries as part of its country monitoring. IMF's visits to member countries are called Article IV Consultations, as they are required by Article IV of IMF's Articles of Agreement. The statement is based on IMF experts’ own assessments and on discussions they have had with Finnish authorities, labour market organisations, financial institutions, research institutes and others.