These are measures that can reduce inflation, the IMF believes.

inflation worldwide, this is a serious problem for all countries, so central banks have tightened the reference interest rate to achieve price stability; however, there are still nations that do not formulate prudent monetary and fiscal policy.

How to fight inflation?

Kristalina Georgieva, Executive Director International Monetary FundHe reminded countries that “fiscal policy should work with monetary policy, not against it.”

This “to avoid fueling inflation, any new spending should be offset by savings or new income,” he said.

For example, by formulating the correct fiscal policy, the country ensures the correct distribution of income received by it from investments; and the key is to give “priority to protecting vulnerable households through concrete measures to mitigate the effects of rising food and fuel prices,” he said.

However, you cannot think of spentif you also don’t think about preservation; therefore, it is necessary to restore reserves and reduce the country’s debt. The pandemic has given us a stark illustration of why fiscal space matters and how important it is to address pre-existing vulnerabilities.

We need good politicians

Georgieva also recalled that as monetary and fiscal policymakers find a balance in their designs, they cannot ignore tensions in the financial sector.

For this reason, banks and companies must also be protected from bankruptcy. Under this protection, he said, are systemic institutions with separate tools to address sources of high vulnerabilities between non-banking financial institutions and credit markets.

What happens if the policy is wrong?

Prolonged low growth, entrenched inflation and even a crisis sovereign debt with the risk of infection. They are the result of the wrong formulation of policy; however, if they are well calibrated over time, there will be robust growth, stable prices and, most importantly, we will see the emergence of more resilient economies better prepared for shocks, he said.