IMF says US growth not enough to fight high debt, deficit levels

The head of the IMF said US Treasury Secretary Scott Bessent’s plan to grow the economy out of its mounting debt and fiscal deficit problems won’t work fast enough.

“The authorities very much rely on strong growth in the US,” Managing Director Kristalina Georgieva said Wednesday. “Growth, of course, helps but it cannot deliver fast enough the necessary adjustments.”

“Some measures would be necessary,” she added, speaking in Bangkok during the International Monetary Fund-World Bank annual meetings.

Kristalina Georgieva Photographer: Sirachai Arunrugstichai/Bloomberg

Bessent, who isn’t attending this week’s gathering, has said in recent months that the US will be able to change its debt and deficit trajectory through a reliance on strong economic growth.

“What is important is the debt-to-GDP, and we will start bending that curve and bringing it down,” Bessent said last week. “It could happen very quickly.”

He added that consistent gross domestic product growth above 3%, a target set to be hit for last quarter of the year, will help secure the goal.

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Meanwhile, US debt is heading into unprecedented territory, one of the key reasons behind a surge in long-term borrowing costs that has raised alarm bells globally.

The Congressional Budget Office in February warned the debt-to-GDP ratio in 2030 will exceed a record 106% set in 1946. Total US public debt has surpassed $40 trillion for the first time, with a surge of a third in less than five years.

And the deficit has reached $2 trillion and is on track to pass 6% of gross domestic product this fiscal year, the CBO said.

CBO Director Phillip Swagel projected last week that the US would need to grow at least 5% annually to stabilise the federal debt levels, assuming an interest-rate level of 4%. At a higher interest rate of 5% — roughly the current level — the US would need 6% GDP growth, adjusting for inflation.

Economists surveyed by Bloomberg see the US on track for a growth rate of a little over 2%, adjusted for inflation, for this year.

Alongside growth, Bessent has also vowed to put forward a fiscal consolidation package to reduce spending, saying since August that he’s working with Office of Management and Budget Director Russ Vought on the plan. However, hasn’t offered any public details.

The Treasury Department didn’t respond to a request for comment sent outside regular business hours.

Bessent skipped the IMF meetings this week, as well as a gathering of Group of 20 finance ministers he was expected to lead. The US is also the most important member of the IMF, as it has the biggest voting share.

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The US delegation this week is being led by Deputy Secretary Francis Brooke and Erin Browne, the undersecretary for international affairs. Bessent skipped a similar G20 meeting in South Africa last year as well.

Global imbalances

On the broader issue of global imbalances, Georgieva said Wednesday that the IMF has been “ringing the alarm bell on excessive global imbalances growing.”

“We need to look at who are the biggest contributors, and they are primarily China and US,” she said, adding that China needs to boost domestic consumption while other economies must focus on lowering debt and deficit levels and spend less.

The gap between surplus savers like China and Japan and deficit economies like the US is back at the highest level since the lead-up to the 2007-08 global financial crisis, and is nearing a 150-year peak, a level that has preceded past turmoil.

“To put it very simply,” she said. “China needs to spend more. The US has to save more, and Europe has to invest more.”

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