The International Monetary Fund (IMF) has urged the United States to adopt more sustainable fiscal policies to reduce its growing budget deficit and national debt. With the country’s debt standing at $36.8 trillion and a federal debt-to-GDP ratio of 122%, the IMF expressed concern about the long-term implications for economic stability.
Gita Gopinath, the IMF’s first deputy managing director, emphasized the importance of lowering deficits to stabilize the debt trajectory. Speaking to the Financial Times, she stated that fiscal policy must align with the goal of gradually reducing the debt burden.
IMF warning follows US credit rating downgrade
The IMF’s warning comes shortly after Moody’s downgraded the US credit rating, removing its last triple-A score. The agency cited the growing debt and ongoing political uncertainty in Washington as key reasons behind the downgrade. According to the Congressional Budget Office, federal debt held by the public rose to 98% of GDP in 2024, up from 73% in 2014. Moody’s also warned that if former President Trump’s proposed policies are implemented, the federal deficit could rise to nearly 9% of GDP by 2035, up from 6.4% in 2023.
White House downplays concerns, blames previous administration
Treasury Secretary Scott Bessent dismissed Moody’s downgrade as a “lagging indicator” and blamed the current deficit on policies from the Biden administration. In an interview with NBC, Bessent defended the Trump administration’s economic strategy, claiming it inherited a large deficit and is now working to reduce it. He said the government aims to lower the deficit to 3% by the end of Trump’s term. Gopinath acknowledged this effort but highlighted that underlying structural issues remain unresolved.
Tariff uncertainty adds to economic risk
Beyond fiscal concerns, the IMF also pointed to uncertainty in US trade policy. Gopinath specifically mentioned the administration’s inconsistent approach to tariffs. She said there is still significant uncertainty around future tariff rates. The IMF recently cut its US growth forecast for 2025 to 1.8% and revised global growth to 2.8%. A temporary agreement between the US and China has led to a 90-day tariff reduction totaling 115 percentage points. While this has eased some tensions, the IMF warned that unresolved trade issues could still hamper long-term growth. Gopinath welcomed developments in US-UK trade talks but remained cautious about lasting agreements.