The passing of the late Queen Elizabeth II is not the only turmoil Britain has to deal with at the moment; With a new Prime Minister taking office and many other new arrangements in store, the United Kingdom (UK) is also under the impact of its political shifts. One notable incident was when the Bank of England (BoE) came under fire over its new policy last Tuesday, with the International Monetary Fund (IMF) heavily criticising it and pressuring the new finance minister of the United Kingdom Kwasi Kwarteng to reappraise his latest scheme.
Kwasi’s new policy acts as a corresponding plan to support the new British Prime Minister Liz Truss’s goal of putting a stop to UK’s stagnant growth over the years via tax cuts and new regulations. This means that we will be seeing households and businesses be assisted with energy bills, bringing a doubled long-run rate of economic growth to the country. Such a move was not received well by investors as an additional 72 billion pounds in government borrowing issuance would be needed this fiscal year alone.
Apart from the criticisms lashed out by a host of investors, the IMF also questioned the new policy and its wisdom behind as the latter has already sent the pound to an all-time low ($1.0327) on Monday. A spokesman for the United Nations agency labelled the new fiscal scheme “Large but untargeted”, and given the inflation pressure experienced by many countries now, it is only unwise to launch a fiscal policy that will work against the country’s monetary policy.
Furthermore, the Fund has highlighted that a budget due November 23 from the British finance minister will give an “Early opportunity” for the government to reassess its finance policies, most notably those that are easing more benefits to the higher-income groups.
In response to comments made by the renowned agency, Kwasi has made it clear that the BoE will step up its efforts to instate the plan in a way that will reassure everyone in the country. The British finance minister also has no plans of resigning after taking office less than a month ago, and the policy will proceed according to plan.
Whether or not the investors and people from the UK are buying into the upcoming “Big” changes remain to be seen, but the ferocious selling of British government bonds can only mean one thing: A crisis of confidence in the new British Prime Minister’s management of the economy is inevitable.
(Photo Credits: The Telegraph)