Debt Crisis Looming: US National Debt Threatens Global Economy According to IMF

Washington, D.C. – The International Monetary Fund issued a stark warning about the alarming rise in the U.S. national debt, highlighting the significant risks it poses to the global economy. The IMF raised concerns about the high inflation that could result from the growing debt levels, projecting a fiscal deficit of 7.1% in 2025, more than triple the level in other advanced economies.

According to the IMF’s latest Fiscal Monitor report, loose fiscal policies in the United States are putting pressure on global interest rates and the value of the dollar. This has the potential to increase funding costs worldwide, exacerbating existing vulnerabilities and risks. With public debt in the U.S. projected to nearly double by 2053, concerns are mounting about the sustainability of the current spending trajectory.

In 2023, the U.S. experienced significant fiscal slippages, with government spending exceeding revenue by 8.8% of GDP, a 4.1% increase from the previous year. Despite strong economic growth, these imbalances are contributing to a concerning trend of rising debt levels. The Congressional Budget Office warns that if this trend continues, the national debt could reach a staggering $54 trillion within the next decade.

The IMF has identified the U.S. as one of four countries that urgently need to address fundamental imbalances between spending and revenue. Alongside China, Italy, and the United Kingdom, the U.S. faces a critical challenge in restoring fiscal sustainability. The risk of undermining the country’s economic standing on the global stage looms large if corrective actions are not taken swiftly.

President Biden and Democratic lawmakers have significantly increased government spending, propelling the U.S. national debt past $34 trillion. This massive expenditure has boosted the economy but raised concerns about the resurgence of inflation and financial instability. The IMF warns that global funding costs could escalate, posing short-term risks to the disinflation process and long-term threats to fiscal and financial stability worldwide.

IMF chief economist Pierre-Olivier Gourinchas emphasized the need for decisive action to address the growing debt burden. The IMF’s call to action underscores the urgency of implementing measures to restore fiscal balance and mitigate the risks associated with escalating national debt levels. The implications of inaction could have far-reaching consequences for the global economy, requiring concerted efforts to safeguard financial stability in the years ahead.