The International Monetary Fund warns the UK government about risks in meeting public finance targets. The IMF highlights that recent changes to fiscal policy have enhanced credibility but emphasizes managing risks from external factors. Limited fiscal space coupled with the global economic situation could lead to breaching fiscal rules if growth falters or interest rates rise. To navigate these challenges, the IMF suggests Rachel Reeves needs greater flexibility in fiscal measures and should refine fiscal rules to avoid emergency cuts. The government's recent policy changes increase pressure on public finances as a tough budget approaches.
The IMF cautioned that the UK government could risk breaching fiscal rules as external uncertainties, such as a potential trade war, impact growth and interest rates.
The organisation emphasized the necessity for Rachel Reeves to maintain flexibility in tax and spending measures to meet public finance targets amidst economic challenges.
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