IMF urges more debt analysis in advanced economies

WASHINGTON (Reuters) - The International Monetary Fund acknowledged on Monday it had not anticipated a surge in public debt in debt-stricken countries such as Greece and called for expanded analysis of growing debt piles in advanced economies.

An IMF staff report said large increases in the debts of developed economies have highlighted the need to look at changes in the way the IMF assesses a country's debt sustainability.

The report suggested the analysis be broadened to make sure it includes all government agencies and institutions, including those not subject to normal budget rules.

"Before the crisis, fund analysis did not always pay sufficient attention to public debt sustainability in market access countries, particularly in advanced economies," the report said.

It said IMF debt analysis "had often turned into a routine exercise" and there was little discussion of findings once the assessments were completed.

The IMF board called for guidelines to be developed in coming months, which would modernize the so-called IMF framework for fiscal policy and public debt sustainability.

IMF staff suggested setting a 60 percent threshold for debt as a percentage of gross domestic product, which would then automatically trigger deeper analysis for countries that have access to markets.

The IMF and European Union have provided rescue loans to Greece, Portugal and Ireland since last year as the countries have struggled to rein in budget deficits.

There are growing fears in markets that Greece will default as economic growth in the euro zone slows and Athens has veered off fiscal targets set under an IMF-EU loan program.

In an example of shortcomings in the IMF's debt analysis, an IMF review in 2007 projected a drop in the ratio of Greece's public debt to GDP to 72 percent in 2013 from 93 percent in 2007. All but one test showed debt was on a declining path over the medium term.

Two years later, an IMF review of Greece's debt warned that Greek debt could rise to 115 percent of GDP by 2010, even if cost-cutting measures were implemented.

(Reporting by Lesley Wroughton; Editing by Leslie Adler)