Congressional Budget Office director Phillip Swagel analyzes where lawmakers stand to slow down debt growth.
The astronomical rise in the U.S. national debt poses "significant risks" to the global economy and threatens to continue fueling high inflation, according to a new warning from the International Monetary Fund.
In its latest Fiscal Monitor, the Washington-based institution said that it expects the U.S. to record a fiscal deficit of 7.1% in 2025 – more than triple the level in other advanced economies.
"Loose fiscal policy in the United States exerts upward pressure on global interest rates and the dollar," Vitor Gaspar, director of the IMF’s fiscal affairs department, told reporters. "It pushes up funding costs in the rest of the world, thereby exacerbating existing fragilities and risks."
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The Capitol Building in Washington, DC, US, on Wednesday, Jan. 17, 2024. (Photographer: Julia Nikhinson/Bloomberg via Getty Images / Getty Images)
Under current policies, public debt in the U.S. is projected to nearly double by 2053. The IMF identified "large fiscal slippages" in the U.S. in 2023, with government spending surpassing revenue by 8.8% of GDP – a 4.1% increase from the previous year, despite strong economic growth.
If this trend continues, the Congressional Budget Office anticipates the national debt will grow to an astonishing $54 trillion in the next decade. Higher interest rates are also compounding the pain of higher debt.
Should that debt materialize, it could risk America's economic standing in the world.
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The U.S. is one of four countries that needs to critically address "fundamental imbalances between spending and revenue." The other three are China, Italy and the United Kingdom.
IMF officials participate in a news conference at the annual meetings of the International Monetary Fund and World Bank in Washington, D.C., on April 16, 2024. (Photographer: Samuel Corum/Bloomberg via Getty Images / Getty Images)
The U.S. national debt topped $34 trillion in January after a burst of spending by President Biden and Democratic lawmakers and is well on its way to surpassing $35 trillion.
But the massive amount of spending – though it has helped to propel the economy – also risks reigniting inflation and undermining financial stability worldwide by increasing global funding costs, according to the IMF.
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"It raises short-term risks to the disinflation process, as well as longer-term fiscal and financial stability risks for the global economy," IMF chief economist Pierre-Olivier Gourinchas said Tuesday. "Something will have to give."
FAQs
International Monetary Fund warns of U.S. debt: 'Something will have to give' The International Monetary Fund warned the United States that government spending and increasing national debt are not sustainable and could hurt the global economy.
What is the IMF warning about the US debt? ›
US becomes more 'vulnerable' with 'more debt,' analyst warns
The astronomical rise in the U.S. national debt poses "significant risks" to the global economy and threatens to continue fueling high inflation, according to a new warning from the International Monetary Fund.
What is the IMF dollar warning? ›
The head of the International Monetary Fund warned the US that the global economy is closely watching interest rates and industrial policies given the potential spillovers from the world's biggest economy and reserve currency. “All eyes are on the US,” Kristalina Georgieva said in an interview.
What does the IMF warn Washington on dangers of continued deficit spending? ›
In the dry language of staff economists, the IMF is sounding the alarm about the "large fiscal slippages" in the U.S. — and the effect continued deficit spending will have on overall public debt. China also comes in for criticism.
What is the US national debt in 2024? ›
U.S. publicly held debt 2013-2024
In April 2024, the public debt of the United States was around 34.62 trillion U.S. dollars, more than two trillion more than in July when it was around 32.6 trillion U.S. dollars.
Where is the US debt coming from? ›
The national debt is the sum of a nation's annual budget deficits, offset by any surpluses. A deficit occurs when the government spends more than it raises in revenue. The government borrows money by selling debt obligations to investors to finance its budget deficit.
Which countries owe most to IMF? ›
Who owes the IMF money?
- Argentina is the biggest debtor to the IMF, with a total outstanding debt of $42.9bn. ...
- Egypt is the second-largest debtor by amount, with an outstanding balance of $14.9bn. ...
- Ukraine also features among the IMF's largest debtors with a total outstanding debt of almost $12bn.
If the Federal Reserve creates money and the U.S. government assumes and monetizes debt faster than the U.S. economy grows, the future value of the currency could fall in absolute terms. Fortunately for the United States, virtually every alternative currency is backed by similar economic policies.
What is the warning for the US debt? ›
The US Department of Treasury building seen in March 2023. US government debt is nearing $35 trillion. The high and rising level of US government debt risks driving up borrowing costs around the world and undermining global financial stability, the International Monetary Fund has warned.
Is the U.S. dollar a fixed or floating currency? ›
The U.S. dollar and other major currencies are floating currencies—their values change according to how the currency trades on forex markets. Fixed currencies derive value by being fixed or pegged to another currency.
Reagan was inaugurated in January 1981, making the first fiscal year (FY) he budgeted 1982 and the final budget 1989. During Reagan's presidency, the federal debt held by the public nearly tripled in nominal terms, from $738 billion to $2.1 trillion.
What is the US national debt today? ›
What is the national debt? The national debt ($34.58 T) is the total amount of outstanding borrowing by the U.S. Federal Government accumulated over the nation's history. Updated daily from the Debt to the Penny dataset.
Is US national debt increasing? ›
Debt has risen steadily in recent years, and as of mid-May 2024, the national debt stands at $34.56 trillion. The nation's debt has essentially doubled in just 15 years and represents the impact of accumulated deficit spending.
What country is most in debt? ›
At the top is Japan, whose national debt has remained above 100% of its GDP for two decades, reaching 255% in 2023.
Who owns most of the US debt? ›
Nearly half of all US foreign-owned debt comes from five countries. All values are adjusted to 2023 dollars. As of January 2023, the five countries owning the most US debt are Japan ($1.1 trillion), China ($859 billion), the United Kingdom ($668 billion), Belgium ($331 billion), and Luxembourg ($318 billion).
Who has more money than the US government? ›
For context, 31 billionaires are each worth more than the federal government's $38.8 billion in cash, according to the Bloomberg Billionaires Index. Some of them, like fashion mogul Bernard Arnault – are worth a lot more. Arnault, the chairman of luxury goods maker LVMH, has a net worth estimated at $193 billion.
Is US national debt a concern? ›
Is the US national debt actually a problem? While it exceeds $34 trillion — 122% of the US gross domestic product — these numbers don't necessarily point to a looming disaster. The $20 trillion in new debt added in the last 14 years may not be bringing us closer to a day of reckoning.
Why is the US so heavily in debt? ›
One of the main culprits is consistently overspending. When the federal government spends more than its budget, it creates a deficit. In the fiscal year of 2023, it spent about $381 billion more than it collected in revenues. To pay that deficit, the government borrows money.
What is the future of the US debt? ›
In 2023, for example, the nation's total publicly held debt amounted to 97% of the full value of the economy as measured by GDP. By 2054, the debt-to-GDP ratio will, according to most recent projections from the Congressional Budget Office, exceed 172% (meaning debt will be close to double the nation's economy).
Has the US borrowed from the IMF? ›
The United States has borrowed foreign currencies from the IMF on 28 different occasions, more than any other country. We drew about $3 billion of DM and yen in 1978 to help defend the dollar in the exchange markets.
