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Tories blast IMF after warning wreaks havoc

By Tom Witherow

SENIOR Tories have hit back at the International Monetary Fund after its warning about the UK’s economy rattled the markets.

The sell-off of Government bonds and sterling restarted yesterday morning after the IMF, part of the United Nations, made a highly unusual statement on Tuesday night criticising last week’s mini-Budget.

The pound yesterday hit lows of $1.05 before rallying to $1.09, while rising yields on long-term bonds forced the Bank of England to intervene to stabilise the market.

The IMF, which is meant to encourage global financial stability, said that ‘given elevated inflation pressures in many countries, including the UK, we do not recommend large and untargeted fiscal packages at this juncture’. It added that ‘it is important that fiscal policy does not work at cross purposes to monetary policy’ and said it was ‘closely monitoring recent economic developments’.

The IMF even urged Chancellor Kwasi Kwarteng to perform a Uturn on his tax cuts when he delivers another mini-Budget on November 23, especially those ‘that benefit high-income earners’. There was a similar statement from credit agency Moody’s, which branded the mini-Budget ‘credit negative’, raising the prospect the UK’s debt could be downgraded, making it more expensive to borrow.

The IMF intervention, usually reserved for troubled emergingmarket economies, was met with fury inside the Treasury, with senior Tories blaming it for sparking the fresh sell-off after a day when markets had calmed.

They fear that bowing down to the IMF’s economic ‘orthodoxy’ will plunge the UK into a deep recession, and called for it to ‘keep its nose’ out of decisions made by elected politicians.

Former Cabinet minister John Redwood said: ‘The IMF were very wrong, as was the Bank of England, over the inflation which they now rightly worry about.

‘They didn’t warn us or the other central banks, that the monetary policies of 2021 were far too loose, interest rates far too low, and the money printing was getting out of control. It’s a great pity. Now they should be looking forward. We should be fighting recession.

‘But the truth is that if the austerity policies have their way and we have a big recession, the borrowing won’t go down, the borrowings will soar.’

Former Brexit negotiator Lord Frost told The Daily Telegraph: ‘The IMF has consistently advocated highly conventional economic policies. It is following this approach that has produced years of slow growth and weak productivity.

‘The only way forward for Britain is lower taxes, spending restraint, and significant economic reform. Liz Truss and Kwasi Kwarteng are rightly focused on delivering this and they should tune out the criticism from those who are still in the intellectual world of Gordon Brown.’

An ally of Miss Truss added: ‘The IMF are the guardians of absolute orthodoxy and they will plunge us into recession. They are not independent. They’re dominated by Europe and they hate Brexit – this is just another side attack on the UK.’

The Prime Minister’s economic guru Julian Jessop warned against the flurry of bad news causing a ‘doom loop’, adding that ‘people have over-reacted in the heat of the last few days’.

The IMF banged the drum for austerity in the years after the financial crisis of 2008/09, which some senior Tories believed pushed then Chancellor George Osborne to cut too far.

As late as 2017, the IMF told the UK that ‘continued deficit reduction is critical’ if it was to respond effectively to further shocks. However, the Government was able to borrow more than £300billion to support businesses and families through the pandemic.

‘They will plunge us into recession’

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2022-09-29T07:00:00.0000000Z

2022-09-29T07:00:00.0000000Z

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