IMF warns of risks of increasing US national debt
Date
4/21/2024 2:36:17 AM
(MENAFN) The International Monetary Fund (IMF) has sounded a cautionary note regarding the substantial increase in the US national debt, warning of its potentially detrimental impact on the global economy. According to the Washington-based institution, the mounting debt levels pose "significant risks" and have the potential to perpetuate high inflationary pressures.
The IMF's latest Fiscal Monitor report indicates that the United States is anticipated to register a fiscal deficit of 7.1 percent in 2025, a figure that surpasses the deficits observed in other advanced economies by more than triple. This projection underscores the magnitude of the fiscal challenges facing the US and emphasizes the urgency of addressing the burgeoning debt levels.
"Loose fiscal policy in the United States exerts upward pressure on global interest rates and the dollar," a business news agency cited Vitor Gaspar, director of the IMF’s fiscal affairs department, as saying.
"It pushes up funding costs in the rest of the world, thereby exacerbating existing fragilities and risks,” he further mentioned.
Under current policies, projections indicate that public debt in the United States is on track to nearly double by 2053, according to assessments from the International Monetary Fund (IMF). This trajectory highlights a concerning trend that raises questions about the sustainability of US fiscal policies and their long-term implications.
The IMF has pinpointed "large fiscal slippages" in the US, particularly notable in 2023, where government spending outpaced revenue by 8.8 percent of GDP. This figure represents a significant increase of 4.1 percent compared to the preceding year, despite the backdrop of robust economic growth. Such deviations from fiscal balance exacerbate the challenges posed by the escalating debt burden and underscore the need for prudent fiscal management.
The potential realization of such high levels of debt carries profound implications for America's economic stature on the global stage. Excessive debt can erode investor confidence, strain government resources, and undermine economic stability, jeopardizing the country's standing in the international financial system. Therefore, addressing the root causes of fiscal imbalances and implementing measures to mitigate the growth of public debt are essential to safeguarding America's economic resilience and global reputation.
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