IMF warns France on fiscal risks as deficit lingers

The International Monetary Fund warned on Thursday that France faces growing public finance risks as efforts to tighten the budget continue to lag while debt levels remain elevated.

Following its annual staff visit to the country, the IMF said France’s public budget deficit narrowed to 5.1% of gross domestic product in 2025.

However, the fund cautioned that attempts to further reduce the deficit were moving more slowly than expected and faced significant implementation risks.

IMF flags risks to deficit reduction plans

The IMF said current policies were unlikely to help the French government achieve its target of reducing the budget deficit below 3% of GDP by 2029.

In its statement, the fund said the upcoming presidential election next year could provide an opportunity for a more credible fiscal reset.

The IMF warned that without additional measures, France’s debt levels would remain high and could increase the likelihood of more severe spending cuts in the future.

The fund also pointed to rising spending pressures linked to an ageing population, defence requirements, and the energy transition.

These pressures are adding strain to already elevated public spending levels.

According to the IMF, France’s public spending reached 57.5% of GDP last year.

Economic growth is expected to remain weak

The IMF projected modest economic growth for France over the next two years.

The economy is expected to expand by 0.7% in 2026 after growing 0.9% in 2025.

The fund said geopolitical tensions and domestic political uncertainty ahead of the 2027 presidential election were weighing on economic activity.

The IMF suggested that the current environment could make fiscal consolidation efforts more difficult while also limiting growth momentum.

IMF calls for structural reforms

To contain fiscal risks, the IMF called for a credible multi-year strategy that combines spending restraint with structural reforms.

The fund specifically highlighted the pension system, unemployment benefits, and public spending efficiency as areas requiring attention.

According to the IMF, reforms should include tighter unemployment benefits as well as more efficient spending on healthcare and education.

The fund stressed that structural reforms would be necessary alongside budget discipline to place public finances on a more sustainable path.

Pension reform likely to remain key political issue

Pension reform is expected to become one of the main battlegrounds ahead of the 2027 presidential election.

The issue remains politically sensitive after the government suspended a 2023 increase in the retirement age last year.

The suspension was introduced as a concession to secure the adoption of the budget.

The IMF’s comments suggest that future governments may face renewed pressure to revisit pension reforms as part of broader efforts to improve France’s fiscal position.

The fund warned that delaying corrective action could leave France more exposed to market pressure and future economic shocks.