IMF Urges Healey to Stay the Course on UK Public Finances 2026

The International Monetary Fund (IMF) has urged UK Chancellor John Healey to "stay the course" on repairing the UK's public finances, as it upgraded its growth forecast for the British economy. The advice comes from Silvana Tenreyro, the IMF's economic counsellor, speaking at the launch of the IMF's World Economic Outlook in Bangkok.

IMF: UK "Stands Out" in G7 for Deficit Reduction Plan

Tenreyro, a former member of the Bank of England's monetary policy committee, said the UK "stands out" among G7 countries for having a credible plan to narrow its deficit. "The UK has already started a consolidation process," she said. "The message for the UK is simply, stay the course."

This endorsement comes just two weeks before Healey's first budget, where he faces pressure to announce a generous energy support package amid expected sharp rises in energy bills in January.

IMF Growth Forecast for UK

The IMF has upgraded its growth forecast for the UK this year but expects a modest slowdown in 2027 as higher energy prices take their toll. The table below summarises the IMF's latest projections.

Healey Under Pressure to Balance Support and Fiscal Discipline

Healey is caught between calls for immediate relief for households and businesses facing soaring energy costs, and the IMF's advice against broad subsidies. In its World Economic Outlook, the IMF advises member governments that any support should be "temporary, targeted and non-distortionary."

Responding to the IMF's comments, Healey said: "Conflict in the Middle East and Europe is hitting people in the UK and around the world. But Britain's economy is showing strong international confidence."

Key Takeaways for UK Fiscal Policy

• Stay the course: The IMF backs the UK's current fiscal consolidation plan.
• Targeted support: Any energy support should be temporary and targeted, not universal.
• Growth upgrade: The IMF has raised its UK growth forecast for this year.
• Future challenges: Higher energy prices may slow growth in 2027.

Why the IMF's Endorsement Matters

The IMF's endorsement provides political cover for Healey to resist pressure for unfunded giveaways in his upcoming budget. It also signals to international investors that the UK remains committed to fiscal discipline, which could help stabilise borrowing costs.

However, the Chancellor must still navigate a difficult balancing act. With energy bills set to rise sharply in January, he may need to design a support package that is generous enough to protect vulnerable households but targeted enough to avoid distorting the economy. The background to this story is set out in Healey Backs Away from Welfare Cuts Despite £28bn Shortfall.

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