IMF urges Latin America to stay fiscally disciplined amid rising global uncertainty

The International Monetary Fund (IMF) has urged Latin American nations to maintain prudent fiscal policies in light of intensifying global trade tensions and rising policy uncertainty. In a written response to Reuters ahead of his visit to Paraguay, IMF Deputy Managing Director Nigel Clarke emphasized the need for continuity in economic planning.

“Now is not the time to change policy frameworks or abandon fiscal plans,” Clarke stated, as he prepared to launch a regional training initiative aimed at bolstering economic analysis and institutional strength across the region.

Clarke acknowledged that Latin America had weathered the COVID-19 pandemic better than expected, notably by rolling back emergency fiscal measures in a timely manner. However, he pointed out that countries such as Brazil, Chile, Colombia, Mexico, Paraguay, Peru, and Uruguay are now seeing debt levels similar to those recorded during the peak of the pandemic in 2020.

This rebound in debt, he noted, leaves the region more vulnerable to market shocks, particularly in a volatile global landscape where U.S. market dynamics and slower global growth add uncertainty.

“Our message to the countries of Latin America and the Caribbean is to continue implementing the necessary structural reforms and to strengthen the resilience of their economies,” Clarke said. He also advocated for reducing trade barriers to deepen regional and global trade integration.

In April, the IMF revised its 2024 growth forecast for Latin America and the Caribbean down to 2.0%, from 2.4% in 2023, and below the 2.5% estimate released in January. This downgrade was largely due to the slowdown in Mexico, whose economy is tightly tied to the United States and has been impacted by U.S. trade tariffs.

Clarke’s visit to Paraguay includes the launch of an IMF regional training program, hosted by Paraguay’s Central Bank. The program, covering South America and Mexico, aims to support professional development and improve economic data capabilities. It kicks off with eight courses scheduled over the next year, beginning with a focus on macroeconomic and fiscal policy.

The economic outlook has also seen broader market ripple effects, with assets such as Bitcoin, previously buoyed by U.S. political support, experiencing declines.