IMF says fiscal and monetary policy not enough

The ageing population could jeopardise the social security system (swissinfo/Lisa Schäublin) swissinfo/Lisa Schäublin

The International Monetary Fund (IMF) has given Switzerland the thumbs up for its fiscal and monetary economic policies.

This content was published on March 7, 2005 - 19:34

But the latest IMF report also advised the Swiss to press ahead with structural reforms to increase sustainable growth and ensure the funding of the welfare system.

In its annual assessment of the Swiss economy, the IMF welcomed the return of economic growth in Switzerland and the results in the financial sector.

It said Switzerland’s economic growth was well-balanced and was likely to continue this year, albeit only at a rate of 1.5 per cent.

Bob M. Traa, who headed the visiting IMF delegation, said in Bern on Monday that the monetary policy and the communications strategy of the Swiss National Bank were working well.

He recommended the bank leave current interest rates unchanged until the economic recovery takes hold.

Traa added the IMF saw no major risk of inflation, despite high oil prices.

Social security

The IMF warned that good fiscal and monetary policies were not enough and it called for further structural reforms to promote sustained growth.

Long-term measures in order to alleviate pressure on the funding of the social security system, including the old-age pension scheme, were necessary, said the IMF.

It came out in favour of increased coordination of fiscal policy between the federal and cantonal authorities.

The report also called for further steps to liberalise the domestic market, as well as opening up the telecom, energy, postal and railway sectors.

It recommended reforms to the system of subsidies for the agriculture sector and measures to reduce healthcare regulations.

The Swiss finance ministry said it agreed with most observations made in the IMF report, in particular with its appraisal of a SFr3 billion ($2.6 billion) programme of public spending cuts approved by parliament last year.

The National Bank said it welcomed recommendations by the IMF to use the revenue from the sale of bank’s surplus gold reserves for debt reduction.

swissinfo with agencies

In brief

The IMF report praised Switzerland for its fiscal and monetary policy, notably efforts to balance the federal budget.

The IMF recommended measures to ease funding difficulties of the social security system in a bid to ensure sustainable growth.

It urged the Swiss authorities to speed up structural reforms, liberalising the domestic market and opening up sectors including electricity and telecoms.

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