Moody's expresses concern over fiscal health of UK after new budget
Date
11/3/2024 7:44:29 AM
(MENAFN) Moody's, the credit rating agency, expressed concerns regarding the fiscal health of the United Kingdom following the announcement of the Labour government's new budget. In a statement released on Friday, the agency highlighted that the projected increase in government borrowing will represent "an additional challenge" to the nation’s public finances. This warning comes at a time when UK gilt yields, which reflect the effective cost of government borrowing, have surged to their highest levels this year, underscoring the growing market apprehension surrounding the UK's fiscal strategy.
The market's reaction to the budget, which includes an expected £28 billion (approximately USD36.18 billion) in additional borrowing as outlined by Treasury chief Rachel Reeves, illustrates investor unease about the government's financial direction. Moody's noted that the budget provides limited prospects for stimulating economic growth and lacks a sufficient buffer to manage potential future financial shocks, further complicating the country's fiscal landscape.
In their assessment, reported by the Financial Times, Moody's indicated that the new borrowing is facilitated by revised debt measures under the fiscal framework, which they believe will exacerbate the already challenging efforts needed for fiscal consolidation. The agency emphasized that the increased borrowing will pose significant difficulties in achieving a stable fiscal position and maintaining investor confidence in the government's financial management.
Overall, Moody's outlook reflects a broader concern about the sustainability of the UK’s public finances amid rising borrowing costs and the potential for economic instability, suggesting that the government's fiscal policies may require careful reevaluation to ensure long-term economic resilience.
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