IMF takes swipe at the US and UK

THE International Monetary Fund is to deliver a stinging rebuke to the US government for lack of budget discipline and 'excessively optimistic assumptions' about spending and tax revenues.

A draft report leaked yesterday contains some of the strongest criticism ever levelled at the IMF's host country.

It also cuts the Fund's forecast for UK growth to 1.8% this year and 2.3% next - well below the Treasury's figures. Global growth is expected to slow from 3.2% to 3.1% this year.

The IMF is in trenchant mood. It has a swipe at the European Central Bank, urging it to 'take account of the fact that negative developments in individual countries can potentially influence the entire currency area'. Among professional economists, that is as rude as it gets.

The US comes in for equally blunt criticism for 'lack of a medium-term concept to consolidate budgets' - drifting, in other words.

The IMF is alarmed that the US budget deficit is heading for $455bn (£290bn) this year, 6.1% of national output.

It warns that the 'untenably' high US current account deficit could lead to ' disorderly' swings in the dollar.

Gordon Brown's UK growth forecasts get equally short shrift. The IMF figure for 2004 is 2.3%, far short of Brown's 3% to 3.5%. That spells trouble for the Treasury's borrowing forecasts of £27bn and £24bn over two years.

Simon Rubinsohn, at fund manger Gerrard, says borrowing is heading for £30bn and £33bn, a cumulative overshoot of £12bn.

The hapless eurozone is expected to grow at just 0.7% this year, less than Japan. Germany's growth is put at nil.

The Fund's global view has turned only slightly more pessimistic. It still expects rapid growth of 4% next year, down from 4.1%. That is led by emerging nations such as China.