New British Prime Minister Liz Truss – Photo: REUTERS
New Prime Minister Liz Truss of the Conservative Party, after taking office on September 6, has said she wants to bring the economy out of the stagnation of the past years by significantly cutting taxes and increasing government borrowing. .
The new British finance minister, Kwasi Kwarteng, said the government would initially spend 200 billion pounds (about 250 billion dollars) to cut taxes. The government will also spend £60 billion to subsidize gas and electricity costs for homes and businesses for six months, starting in October.
Experts warn this could be a risky move as Ms. Liz Truss does not have too much time before the general election in 2024.
The International Monetary Fund (IMF) believes that the proposal of the British cabinet has caused the pound to fall to an all-time low of $ 1.0327 on September 26.
“Due to mounting inflationary pressures in many countries, including the UK, we do not recommend large and untargeted spending packages at this time,” an IMF spokesman said. 9.
Jim Reid, strategist at Deutsche Bank, described the IMF’s statement as “quite harsh”.
Ratings agency Moody’s also bluntly said the significant tax cuts would negatively affect the UK’s credit rating.
“A prolonged confidence shock stemming from market concerns about the reliability of the government’s fiscal strategy, could permanently undermine the UK’s debt servicing capacity,” Moody’s said. know.
Speaking on LBC Radio, Keir Starmer, leader of the opposition Labor Party, said criticism from the IMF and Moody’s about the new fiscal policy showed that Prime Minister Liz Truss’ government had left the economy in a mess. padded.