IMF Urges US, China Policy Shifts to Cut Global Debt Risks

IMF Managing Director Kristalina Georgieva warned on Wednesday that the United States cannot resolve its rising public debt through economic growth alone and must pursue fiscal adjustments. Speaking at the IMF-World Bank annual meetings in Bangkok, she identified advanced economies, specifically the US and Europe, as the "worst offenders" for excessive borrowing.

Georgieva said Treasury Secretary Scott Bessent acknowledges that US deficit and debt levels are too high and need a more sustainable path. The IMF's latest Fiscal Monitor report echoes the call for urgent consolidation, noting that delays amid higher financing costs will only worsen the task.

“There is no magic. You have to go in a direction of tightening, bringing it down, bringing the deficit down.”

Rising bond yields, driven by inflation and high energy costs linked to the Iran war, have pushed interest rates to multi-decade highs. This disproportionately burdens low-income countries, where interest payments have hit historic highs relative to revenue and declining aid creates financing gaps.

Georgieva also urged China to shift from export-driven growth to a model based on stronger domestic consumption. Rodrigo Valdes, director of the IMF's Fiscal Affairs Department, said fiscal risks are rising globally while a proper policy reaction remains largely absent in many countries.