The head of the International Monetary Fund (IMF) has warned Rishi Sunak that “now is not yet the time to balance the books”.
In an interview with Sky News, Kristalina Georgieva said the UK must stand ready to spend more to support businesses and households through the second surge of the pandemic.
Her comments come as the chancellor faces criticism for providing less generous fiscal support for the economy as Downing Street imposes further restrictions.
Ms Georgieva, who succeeded Christine Lagarde as managing director of the IMF last year, said while the UK had “done very well” with its economic stimulus plans in the early months of the pandemic, “now is not yet the time to balance the books”.
She said: “Of course, now is a good time to think about balancing the books down the road. But it is more important to make sure that firms and workers are supported while we are still wrestling with the pandemic.”
The message is particularly striking since it comes less than a fortnight after the chancellor’s first party conference speech, in which he pledged: “This Conservative government will always balance the books. If instead we argue there is no limit on what we can spend… what is the point in us?”
Ms Georgieva’s comments come at the end of the IMF’s annual meetings, during which the Fund urged countries around the world to spend as necessary if they need to impose further lockdowns.
Ms Georgieva said that the chancellor was right not to extend support to households universally, as it did with the initial furlough scheme.
“We cannot provide support to everyone forever, knowing that the post pandemic economy will be different from the one we had before,” she said.
Talking about governments more generally, she added: “It is paramount for governments not to withdraw (economic) support prematurely. Because if it is done, we risk massive bankruptcies and unemployment.
“We have low interest rates everywhere and governments can afford to borrow.”
The shift is significant, since the IMF is often seen as the world’s fiscal watchdog, keen to keep spending and borrowing under control.
Ms Georgieva said she was hopeful that Boris Johnson and EU leaders could seal a Brexit deal, even though the prime minister has signalled that the talks are now over.
“We need to aim for the best possible outcome,” she said.
“The analysis both by others and ourselves does point to the fact that there are significant consequences if there is no agreement. These are the last few weeks of negotiations – there is still a possibility to continue to work towards that agreement.
“The clock is ticking but it’s not yet midnight.”
A Treasury spokesperson said: “There’s no disagreement on this. We’ve been clear that the immediate priority is to protect jobs and get the NHS the funds it needs to beat the virus.
“We’ve spent over £200bn this year and will continue to provide the support that’s needed. So we agree with the IMF.
“We also agree with them that in the longer term sustainable public finances are essential and it’s important to be honest about that.”