THE sovereign debt crisis has limited the scope for countries to stimulate their economies, a senior International Monetary Fund official wrote in a Chinese newspaper yesterday.

The comments by IMF Deputy Managing Director Zhu Min come after the agency last week cut its forecast for global growth to 4 percent, down 0.3 percentage points from its most recent estimate in June.

The IMF also warned of “severe repercussions” to the global economy unless euro zone nations strengthen their banking system and the United States gets its fiscal affairs in order.

Zhu said in an opinion piece published in China Business News that government debt in developed countries would likely account for 106 percent of their gross domestic product by 2015, up from 96 percent in 2010.

The increase will be smaller than the 23 percentage-point rise in the 2007-2010 period, he said.

In developing countries and emerging markets, government debt as a percentage of gross domestic product will likely drop to 30 percent by 2015 from 36 percent in 2010, Zhu said.

“Many developed countries are facing an array of tough challenges, such as serious financial deficits, massive public debt, a problematic banking system, high jobless rates and weak economic growth,” he said.

IMF Director Christine Lagarde said at the weekend meetings of the IMF and the Group of 20 industrialized and developing nations that finance ministers don’t have the options they had when taking on the 2008 financial crisis. She said the onus was on emerging market economies to do more to boost domestic demand to make up for the economic weakness in advanced countries.

In the commentary, Zhu also said emerging markets must shift their focus to boost domestic gross demand from export-oriented growth.

“With the shift of the global economic growth center to emerging markets from developed nations, the growth model of being highly reliant on demand from developed economies can’t meet the development needs of emerging markets,” he said.

While massive fiscal stimulus packages launched by developing countries helped them reduce the effect of the 2008 financial crisis, they also led to high levels of inflation, said Zhu, adding that inflation will constrain the ability of developing nations to invigorate their economies again.

He also urged developing countries to accelerate reforms of their financial industries and open markets further to foreign competition to increase transparency and effectiveness.

Zhu said his remarks represented his opinion and that they weren’t associated with the IMF. (SD-Agencies)