US budget deficits and soaring debt present a “growing risk” to the global economy and must be urgently addressed, the International Monetary Fund (IMF) warned on Thursday.
The country's national debt is piling up, approaching $35 trillion, data shows. The US federal budget deficit jumped from $1.4 trillion in fiscal 2022 to $1.7 trillion last year, according to the IMF’s latest figures.
The Congressional Budget Office, the official fiscal watchdog in the US, predicted earlier this month that the deficit was likely to hit $1.9 trillion this year, representing around 7% of GDP.
“Such high deficits and debt create a growing risk to the US and global economy, potentially feeding into higher fiscal financing costs and a growing risk to the smooth rollover of maturing obligations,” the IMF said in a statement on its ‘Article IV’ review of US economic policies.
“These chronic fiscal deficits represent a significant and persistent policy misalignment that needs to be urgently addressed,” it added.
The US exceeded its debt ceiling, which was legally set at $31.4 trillion, in January 2023. After months of warnings regarding an imminent default from the US Treasury, President Joe Biden signed a debt bill in June 2023 that suspended the cap until January 2025. This effectively allowed the government to keep borrowing without limits through next year. Debt spiked to $32 trillion less than two weeks after the bill was approved, and has been ballooning ever since.
The IMF also directed harsh criticism toward Washington’s increasingly aggressive trade policies. In an apparent reference to escalating tensions with China, the watchdog said the country’s “ongoing expansion of trade restrictions and insufficient progress in addressing the vulnerabilities highlighted by the 2023 bank failures” could undermine financial stability around the world.
The IMF statement is just the latest warning on US overspending. On Tuesday, the Organization for Economic Cooperation and Development (OECD) said the US debt-to-GDP ratio was at its highest since World War II. The debt-to-GDP ratio is a metric used to gauge a country’s ability to repay what it owes.
Last year, the nation’s debt surged to 122% of its GDP, according to the OECD.