The International Monetary Fund (IMF) has reprimanded the new British government's debt-financed tax cut decisions.

London should "reconsider" the plans, especially those for high-income earners, an IMF spokesman said when asked by journalists.

"Given the heightened inflationary pressures in many countries, including the UK, we do not recommend large and untargeted financial packages at the moment," the IMF official said on Tuesday evening.

The criticism is the next setback for the government of Liz Truss, whose Finance Minister Kwasi Kwarteng announced a large package of around £45 billion in tax cuts on Friday.

Philip Pickert

Business correspondent based in London.

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The previously weak exchange rate of the pound has since fallen again because concerns about the rising British budget and current account deficits are growing on the capital markets.

On Monday morning, the pound fell to $1.037, its lowest rate against the dollar in over 37 years.

Although the pound recovered somewhat after the brief crash, the unrest is still great.

British government bonds lost value, the yield for the ten-year rose to around 4.3 percent to its highest level since 2008.

Some economists expect the British currency to be worth just one dollar soon.

Former US Treasury Secretary and Harvard economist Larry Summers called Britain's fiscal plans "completely irresponsible" and wrote that the pound is likely to fall to par with both the dollar and the euro.

The British central bank is also heavily criticized.

Economists accuse it of raising interest rates too slowly to fight inflation.

Tax cut plans 'likely to increase inequality'

The IMF spokesman expressed a differentiated but clear criticism.

The fund understands the intention of the London government to help families and companies in the face of the energy price shock and to strengthen growth with supply-side reforms.

However, the tax cut plans would disproportionately help high earners and “probably increase inequality”.

The IMF therefore called on Treasury Minister Kwarteng to reconsider the plans and take “more targeted” measures before his financial plan is published in November.

The IMF also warned that the expansionary fiscal policy and the central bank's monetary policy were counteracting each other.

It is unusual for the IMF in Washington to comment on a member country outside of the regular Article IV review cycle.

Former Brexit Secretary David Frost, meanwhile, attacked the IMF in an op-ed in the Telegraph on Wednesday.

The "conventional" thinking of the fund in Washington is responsible for years of insufficient growth.

The UK government under Truss has committed to an aggressive course of tax cuts and supply-side reforms, which Finance Minister Kwarteng said should lift the growth rate to 2.5 percent.

Many economists doubt that this will work.

The central bank has meanwhile sent out signals for larger interest rate hikes.

Chief Economist Huw Pill announced a "significant monetary policy response" to counter sterling's depreciation and inflation.

However, the next rate hike is unlikely to come until the November 3rd regular Bank of England meeting.

On the capital markets, a Bank of England interest rate of more than 6 percent in 2023 is now considered very likely.