The U.S. has a $40 trillion debt problem, and the leader of the International Monetary Fund (IMF) says supercharging the nation\u2019s growth isn\u2019t enough to solve it.<\/p>\n
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Speaking during the IMF\u2019s annual meetings in Bangkok this week, IMF chief Kristalina Georgieva said that while growth can ease the U.S. debt problem, it isn\u2019t a catch-all solution.<\/p>\n
\u201cGrowth, of course, helps, but it cannot deliver fast enough the necessary adjustments,\u201d she said, adding that the budget deficit must also come down.\u00a0<\/p>\n
The Treasury Department pushed back against Georgieva\u2019s warning by questioning the IMF\u2019s forecasting record in a statement to Fortune<\/em>.<\/p>\n\u201cWhen we see pieces on the IMF, it\u2019s good to remember how messy their forecasts have been in the past,\u201d said David Zervos, counselor to Treasury Secretary Scott Bessent, who pointed to rosy economic predictions before the 2008 Global Financial Crisis and the 1997 Asian financial crisis as evidence.<\/p>\n
The IMF did not immediately respond to Fortune<\/em>\u2019s request for comment.<\/p>\nGeorgieva\u2019s comments come at an uncertain time for the U.S. fiscal situation. At $40.3 trillion, according to Treasury data, the national debt is at a record high. It is also the largest in the world.<\/p>\n
Even more worrying to experts is the U.S. gross debt-to-GDP ratio, which stood at about 126%, according to the Treasury Department.<\/p>\n
Publicly held debt is lower, at 100% of GDP, but is still the highest since shortly after World War II ended, according to the Committee for a Responsible Federal Budget.<\/p>\n
A growing economy can make existing debt easier to manage. But if Washington keeps borrowing faster than the economy expands, the ratio can continue rising even when the economy grows.<\/p>\n
The mounting debt also means a greater share of the government\u2019s revenue goes toward interest payments instead of other priorities like public services. Net interest payments made up about 15% of federal spending in fiscal 2026\u2014and about 20% of revenue.\u00a0<\/p>\n
And by fiscal 2031, the Committee for a Responsible Federal Budget has predicted that the average interest rate on federal debt will exceed the economy\u2019s rate of growth\u2014a predicament that could contribute to a self-reinforcing \u201cdebt spiral\u201d and eventually require more drastic spending cuts or tax increases to correct, Fortune<\/em> previously reported.<\/p>\n\u2018We can grow our way out of that<\/strong>\u2019<\/h2>\nAt the same time, Bessent has argued that consistent U.S. economic growth of 3%, fueled partly by AI, can be enough to deal with the issue.<\/p>\n
\u201cThere\u2019s nothing magic about the $40 trillion number,\u201d he told CNBC in August. \u201cAnd we can grow our way out of that.\u201d<\/p>\n
Whether growth alone can actually solve the federal debt is doubtful. An article by the Council on Foreign Relations last month explained that annual 3% economic growth is hard to achieve.\u00a0<\/p>\n
The U.S. has only hit the 3% mark of growth in five calendar years, the most recent being 2019 during President Donald Trump\u2019s first term. U.S. GDP is estimated to grow 2.2% this year, up from 2% GDP growth in 2025.<\/p>\n
Congressional Budget Office Director Phillip Swagel also recently warned, \u201cIt\u2019s probably not plausible\u201d that growth will stabilize the U.S. financial trajectory, explaining that real GDP growth would have to hit 5% to 6%. Instead, changes in revenue and spending are necessary, he noted.<\/p>\n
To be sure, Bessent has said he and White House budget director Russell Vought are working with Trump on a broader deficit-reduction plan, but details have yet to be released.<\/p>\n
The IMF has previously sounded the alarm about the U.S.\u2019s debt problem. In an annual review of the U.S. economy published in April, the organization acknowledged the strength of the U.S. economy.\u00a0<\/p>\n
Still, in the report, the IMF\u2019s executive directors also said the growing debt could be a problem not just for the U.S., but for the rest of the world.<\/p>\n
\u201cThey emphasized that the fiscal trajectory creates a growing financial stability tail risk for the U.S. and for the global economy, given the importance of the U.S. Treasury market for the global financial system.\u201d<\/p>\n<\/div>\n
#U.S #debt #surpasses #trillion #IMF #chief #warns #economic #growth #wont #solve #problem<\/p>\n","protected":false},"excerpt":{"rendered":"
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