The IMF sounds the alarm over the explosion of the American national debt: “Something will have to give”

Phillip Swagel, director of the Congressional Budget Office, analyzes where lawmakers stand to slow debt growth.

The astronomical rise in US national debt poses “significant risks” to the global economy and threatens to continue to fuel high inflation, according to a new warning from the International Monetary Fund.

In its latest Fiscal Monitor, the Washington-based institution said it expects the United States to run a budget deficit of 7.1% in 2025, more than triple the level of other advanced economies.

“Accommodative US fiscal policy is putting upward pressure on global interest rates and the dollar,” Vitor Gaspar, director of the IMF's fiscal affairs department, told reporters. “This drives up financing costs in the rest of the world, thereby exacerbating existing fragilities and risks.”

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The Capitol in Washington, DC, United States, Wednesday, January 17, 2024. (Photographer: Julia Nikhinson/Bloomberg via Getty Images / Getty Images)

Under current policies, U.S. public debt is expected to nearly double by 2053. The IMF has identified “significant fiscal slippages” in the United States in 2023, with government spending exceeding revenues by 8.8% of GDP, or a increase of 4.1% compared to the previous year. , despite strong economic growth.

If this trend continues, the Congressional Budget Office projects that the national debt will reach an incredible $54 trillion over the next decade. Rising interest rates also add to the challenges of rising debt.

If this debt materializes, it could jeopardize America's economic position in the world.

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The United States is one of four countries that must critically address “fundamental spending-income imbalances.” The other three are China, Italy and the United Kingdom.

IMF officials participate in a news conference during the annual meetings of the International Monetary Fund and the World Bank in Washington, DC, April 16, 2024. (Photographer: Samuel Corum/Bloomberg via Getty Images / Getty Images)

The U.S. national debt topped $34 trillion in January after a spending burst from President Biden and Democratic lawmakers and is on track to surpass $35 trillion.

But the massive amount of spending – although it has helped propel the economy – also risks reigniting inflation and undermining global financial stability by raising global financing costs, according to the IMF.

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“This raises short-term risks for the disinflation process, as well as long-term risks for the fiscal and financial stability of the global economy,” Pierre-Olivier Gourinchas, the IMF's chief economist, said on Tuesday. “Something will have to give.”

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