IMF urges US debt measures and China shift towards domestic consumption

Bangkok, Thailand. International Monetary Fund Managing Director Kristalina Georgieva said on Wednesday that the United States needs tax or spending changes to address rising public debt, while China must shift towards domestic consumption rather than export-driven growth. She urged the two biggest economies globally to undertake difficult policy adjustments to curb widening fiscal and trade imbalances.

US growth insufficient to address debt

At the annual meetings of the IMF and World Bank, Georgieva identified advanced economies, particularly the US and European countries, as the leading offenders over excessive debt. She said higher benchmark yields were also affecting low-income countries, where pressure from financial markets had already compelled governments to limit borrowing.

Responding to a press conference question about whether Washington needed a tighter fiscal stance, Georgieva said Treasury Secretary Scott Bessent acknowledged that US deficits and debt were excessive and needed to become more sustainable.

She said US authorities were relying heavily on robust economic growth to bring debt down. The IMF’s assessment, however, was that growth could help but would not produce the required adjustment quickly enough, making fiscal measures necessary.

IMF raises urgency of budget consolidation

The IMF’s Fiscal Monitor, released on Wednesday, similarly called for stronger debt-reduction efforts. It warned that postponing action while borrowing costs remained elevated would make adjustment more difficult in subsequent years.

Rodrigo Valdes, who heads the IMF’s Fiscal Affairs department, said inflation, substantial debt burdens and rising yields had made budget consolidation more urgent worldwide.

Although the IMF has repeatedly delivered that message, Valdes said the jump in bond yields had left governments with limited budgetary flexibility, prompting the institution to strengthen its warning.

Bessent stays away from annual meetings

Bessent is not participating in the Bangkok meetings, despite the United States holding this year’s presidency of the Group of 20 major economies. He has instead prioritised domestic engagements as campaigning intensifies ahead of the US midterm elections.