IMF Warns the United States and China about Massive Deficits
April 19, 2024–Even though consumer prices are coming down, high interest rates due to U.S. and China’s deficits pose significant costs to other countries and carry a risk to global financial stability, the International Monetary Fund warned this week.
“Loose fiscal policy in the United States exerts upward pressure on global interest rates and the dollar. It pushes up funding costs in the rest of the world, thereby exacerbating existing fragilities and risks,” said Vitor Gaspar, IMF director of fiscal affairs.
Rising Debt Poses Costs
By the end of the decade, global debt is likely to reach 99 percent of global GDP. The rising debt levels are increasing “volatility in the United States, raising risks elsewhere through interest rate spillovers,” the IMF Fiscal Monitor warned.
Globally, it imposes excess interest costs on developing countries, which are struggling to struggling to bare the cost.
U.S. Deficits Soar
In 2023, despite a strong economic growth, the U.S. government spending soared. As the country “experienced remarkably large fiscal slippages,” the fiscal deficit rose to 8.8 percent of GDP up from 4.1 percent of GDP in 2022, the IMF reported.
The 2024 IMF Fiscal Monitor is available here.
