Newsflash: The International Monetary Fund has applauded the UK’s progress in reducing its budget deficit last year.

A day after slashing the UK’s growth forecasts, the IMF cited Britain as an example of an major economy which managed to trim its borrowings, after the UK’s deficit fell from 6.1% of GDP in 2024 to 5.4% in 2025.

In its latest Fiscal Monitor report, just released at its spring meeting in Washington, the IMF says:

In 2025, the headline deficit for advanced economies excluding the United States held broadly steady at 2.4% of GDP. The debt-to-GDP ratio for these economies fell only marginally to 95.3%, effectively unchanged from its 2019 level prior to the COVID-19 pandemic.

The United Kingdom recorded a notable improvement, reducing its deficit to 5.4% of GDP, with the change driven by tax increases, tax threshold freezes, and the expiration of temporary measures for energy support.

Canada and Japan also posted gains, reflecting spending restraint. These gains were partly offset by the use of some fiscal space by countries with historically strong fiscal positions, such as Korea and The Netherlands.

The IMF is forecasting that the UK’s annual budget deficit will drop to 3.9% of GDP this year, and continue falling until 2031 when it will be 1.6% of GDP, the second-lowest in the G7 after Canada.

In contrast, the US will need revenue and expenditure measures over the medium term to control its deficit, given “the persistence of primary spending and the scale of projected deficits”, the IMF says.

The Fund also warns Rachel Reeves not to stray from her fiscal rules, saying:

In the United Kingdom, adhering to established spending envelopes while strengthening the efficiency of value-added and property taxes is key to rebuilding buffers.