Global fiscal adjustment is in face of a new challenge as the world economy is slowing, making harder for policymakers to balance fiscal problems and economic growth, said the International Monetary Fund (IMF) on Tuesday.

Carlo Cottarelli, Director of the Fiscal Affairs Department of IMF, answers questions during the Global fiscal adjustment briefing in Washington, D.C., April 17, 2012. Global fiscal adjustment is in face of new challenge as the world economy is slowing, making harder for policymakers to balance fiscal problems and economic growth, said the International Monetary Fund (IMF) on Tuesday. (Xinhua/Fang Zhe)

For countries with fiscal space, near-term fiscal adjustment plans should be calibrated to avoid undue pressures on economic activity and employment, while countries with enough fiscal space could consider slowing the pace of near-term adjustment to reduce downside risks, said the report.

In its World Economic Outlook report that released earlier than the Fiscal Monitor report, the IMF said that downside risks to the global economy still remain elevated after suffering a major setback during 2011.

However, short-term caution should not be "an excuse" to slow or delay efforts to put public finances on a sounder footing over the medium term, as this is vital for sustainable growth, the report asserted.

The Washington-based agency cautioned that debt ratios are still on the rise in most advanced economies, saying advanced economies' debt ratio of the GDP will rise by a further 5 percentage points to 109 percent by 2013 despite continued adjustment.

Though the fiscal conditions of emerging economies remain healthier than those in advanced economies, emerging economies would continue to be exposed to negative spillovers if global conditions deteriorate.

While past efforts with fiscal consolidation are beginning to bear fruit, fiscal risks "remain elevated" overall, noted the report.

"In this uncertain environment, the challenge for fiscal policy is to find the right balance between exploiting short-term space to support the fragile recovery and rebuilding longer-term space by advancing fiscal consolidation," said the IMF.

The report was released prior to the Spring Meetings of the IMF and its sister agency the World Bank, scheduled to kick off on April 20 in Washington D.C., gathering central bank governors, finance ministers and other experts to discuss key global economic issues and policy action.

VietNamNet/Xinhuanet