The economic crisis laid serious damages on the output and employment, but signs of recovery are being depicted by the world especially in the developing economies. The International Monetary Fund recommends the developing economies to cut down their fiscal deficits and public debt by implying various pension and health reforms.

John Lipsky, IMF First Deputy Managing Director said, “High public debt and fiscal deficits have already raised the risk premium for several countries, and could lead to higher interest rates and slower economic growth in the medium term”.

It is being feared that if the ratio of the current public debt is continued to be maintained, it will lead to a reduction in the growth of the advanced economies. John Lipsky further recommended the developing economies to make their fiscal institutions and entitlement reforms strong enough by adopting the various measures like by increasing the retirement age of the employees.

John appreciated China’s move towards public spending in social field rather than infrastructure and predicted an enduring rise in the household consumption which could amount to 1% of the GDP of their country.

He also commented that the policy of building the social safety system in the developing economies would lead to a substantial increase in the consumption, and on the other hand, U. S would stress on fiscal consolidation and in the countries of Europe and Japan, exemptions on indirect taxes could be planned to be reduced.