IMF sounds alarm on ballooning US national debt: 'Something will have to give'
The International Monetary Fund sounded an alarm over huge levels of government spending in the U.S., which it said poses a "risk" to the global economy.
The astronomical rise in the U.S. national debt poses "significant risks" to the global economy and threatens to continue fueling high inflation, according to a new warning from the International Monetary Fund.
In its latest Fiscal Monitor, the Washington-based institution said that it expects the U.S. to record a fiscal deficit of 7.1% in 2025 – more than triple the level in other advanced economies.
"Loose fiscal policy in the United States exerts upward pressure on global interest rates and the dollar," Vitor Gaspar, director of the IMF’s fiscal affairs department, told reporters. "It pushes up funding costs in the rest of the world, thereby exacerbating existing fragilities and risks."
US NATIONAL DEBT TRACKER FOR APRIL 17, 2024: SEE WHAT AMERICAN TAXPAYERS (YOU) OWE IN REAL TIME
Under current policies, public debt in the U.S. is projected to nearly double by 2053. The IMF identified "large fiscal slippages" in the U.S. in 2023, with government spending surpassing revenue by 8.8% of GDP – a 4.1% increase from the previous year, despite strong economic growth.
If this trend continues, the Congressional Budget Office anticipates the national debt will grow to an astonishing $54 trillion in the next decade. Higher interest rates are also compounding the pain of higher debt.
Should that debt materialize, it could risk America's economic standing in the world.
SOARING DEFICITS TO PUSH PUBLICLY HELD DEBT TO RECORD LEVEL IN 4 YEARS
The U.S. is one of four countries that needs to critically address "fundamental imbalances between spending and revenue." The other three are China, Italy and the United Kingdom.
The U.S. national debt topped $34 trillion in January after a burst of spending by President Biden and Democratic lawmakers and is well on its way to surpassing $35 trillion.
But the massive amount of spending – though it has helped to propel the economy – also risks reigniting inflation and undermining financial stability worldwide by increasing global funding costs, according to the IMF.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
"It raises short-term risks to the disinflation process, as well as longer-term fiscal and financial stability risks for the global economy," IMF chief economist Pierre-Olivier Gourinchas said Tuesday. "Something will have to give."