IMF URGES BELGIUM TO MAKE FURTHER SPENDING CUTS

  The Belgian government, which
  introduced large-scale public spending reductions last year,
  has been told by an International Monetary Fund team there is
  scope for further cuts in 1988.
      The suggestion is contained in the preliminary conclusions
  of the annual IMF consultations with Belgium on its economic
  policy, a copy of which was distributed to journalists at the
  weekly press conference following meetings of the cabinet.
      The IMF team also urges Belgium to adopt a firm interest
  rate policy, with a particular emphasis on long-term rates.
      The team's report to the government praises last year's
  spending cuts, which are due to reduce 1987 government spending
  by 195 billion francs, and says 1986 saw the Belgian economy
  perform "better, on a broader basis, than at any time so far in
  the 1980s."
      However, it adds that with lower inflation, stabilisation
  of the debt to gross national product ratio requires a much
  lower budget deficit than the seven pct of GNP target the
  government has set itself for 1989.
      The government's net financing requirement was 11.0 pct of
  GNP in 1986.
      The report says "The most that can be afforded over the next
  few years is a zero growth of real non-interest expenditure of
  general Government."
      It says there is a need for a revision of the Belgian tax
  system to iron out distortions and meet hopes of a reduced tax
  burden but substantial progress is needed in stabilising the
  debt to GNP ratio before this is possible.
      "Because of the difficulty of sustaining zero expenditure
  growth and of likely growing impatience (for) tax reductions,
  we feel that your position would be stronger if you could
  decide on rather sharp expenditure reductions in 1988," the
  report adds.
      The IMF urges a strong interest rate policy to signal the
  government's determination to keep its currency strong and to
  curb inflation.
      It says firmer long-term rates would slow private net
  long-term capital outflows, which increased strongly in 1986.
      It also urges net repayments of foreign currency debt and
  an overhaul of domestic capital markets to facilitate the
  subscriptions by non-residents of government bond issues in
  Belgian francs.
  

