The International Monetary Fund (IMF) said on Thursday that the US has too large a deficit and is saddled with too much debt, and warned of the dangers from increasingly aggressive trade policies, Financial Times reports.
US public debt is piling up and approaching $35 trillion, data shows. The US federal budget deficit rose from $1.4 trillion in fiscal 2022 to $1.7 trillion last year, according to the latest IMF data.
The Congressional Budget Office, the official body that oversees budget rules in the US, earlier this month forecast that the deficit would likely reach $1.9 trillion this year, about 7 per cent of GDP. The IMF said in a statement:
These high deficits and debt pose a growing risk to the US and global economies, potentially contributing to higher fiscal financing costs and a growing risk of smooth rollover of liabilities. These persistent budget deficits represent a significant and persistent policy distortion that needs to be urgently addressed.
In January 2023, the US exceeded its debt ceiling, legislated at $31.4 trillion. After months of warnings of imminent default by the US Treasury, President Joe Biden signed a bill in June 2023 suspending the limit until January 2025.
This allowed the government to continue unlimited borrowing until the following year. Less than two weeks after the bill was passed, the debt rose to $32 trillion and has continued to grow ever since.
The IMF has also sharply criticised Washington’s increasingly aggressive trade policies. In an apparent allusion to escalating tensions with China, the watchdog said “the continued expansion of trade restrictions and insufficient progress in addressing vulnerabilities identified by the 2023 bank failures” could undermine financial stability around the world.
The IMF statement was the latest warning of excessive US spending. On Tuesday, the Organisation for Economic Co-operation and Development (OECD) said the US debt-to-GDP ratio is at its highest level since World War II. The debt-to-GDP ratio is a metric used to measure a country’s ability to pay its debts. According to the OECD, the country’s debt rose to 122 per cent of GDP last year.
