The IMF said the overall global fiscal deficit would shrink at a lower rate than previously expected, falling only from 6.7 per cent in 2009 to 6 per cent in 2010, with the outlook for rich economies worsening markedly since the previous forecasts in November.

“Even as the global economy improves, fiscal balances in the advanced economies are on average worsening,” it said.

To bring the ratio of debt to gross domestic product back to the pre-crisis average of 60 per cent by 2030, the advanced economies would need to tighten policy by a hefty 8.7 percentage points of GDP, it said. Without that, growth rates could be permanently reduced by 0.5 percentage points. “Without progress in addressing fiscal sustainability concerns, high levels of public indebtedness could weigh on economic growth for years,” the fund added.

After adjusting for the economic cycle, the rich economies were likely to see the balance of public finances worsen by 0.6 percentage points this year, bringing the overall deterioration since the financial crisis to 5 percentage points. Most of the worsening was caused by the US, where stimulus and military spending have increased, and Germany, because of a combination of new spending and weaker-than-expected tax revenues.

The fund suggested raising and eliminating exemptions for value added taxes and excise duties, together with auctioning carbon emission permits and instituting or raising carbon taxes. A 10 per cent VAT in the US would raise revenue equal to about 4.5 per cent of GDP, while cutting exemptions from the tax in half in the UK would raise 3.3 per cent of GDP – in both cases going a long way to closing their structural deficits.

Many economists expect the new Conservative-Liberal Democrat coalition government in the UK to raise VAT to help fill the UK’s yawning fiscal deficit.

But while regarded as efficient by economists, as they are relatively simple to collect and do not distort incentives as much, value added taxes fall disproportionately on those with low incomes and have proved politically contentious. They have previously been considered and rejected in the US at the federal level, though many states have a similar sales tax. Extending VAT to domestic fuel provoked a storm of protest when the Conservative government introduced it in the UK in 1993. The UK, like many countries, currently exempts a wide range of goods and services from VAT including food, books and children’s clothes.

The IMF was quick to argue that the increase in stimulus spending to counteract the global recession had contributed little to the deterioration in public finances. The fund, which raised eyebrows by calling for fiscal stimulus at an early stage in the crisis, said only a tenth of the rise in public debt in rich countries would ultimately derive from such action.