Public Expenditure and Sustainable Public Finances Post-COVID

Abstract

Abstract The COVID 19 pandemic resulted in a major increase in fiscal imbalances and public spending. Spending and debt ratios reached new historic records in many advanced countries. To some observers this means heightened concerns about sustainability, while others argue for even more public spending financed with more “interest-free” debt. The facts, however, show that more public spending would be a risky strategy given very high public debt ratios. Moreover, there is much room for expenditure reductions and efficiency gains, that would allow to attain more sustainable public finances, boost real economic growth, enhance resilience against crises and pay for future challenges such as population aging, climate change and geopolitics.