IMF calls for US to cut deficits amid bond woes, China to shift away from exports
SPY•IMF Managing Director Kristalina Georgieva said the US needs tax or spending adjustments to reduce debt and China should shift toward domestic consumption. The IMF said rising bond yields have heightened the urgency of fiscal consolidation worldwide.
1. US debt and deficits
Georgieva said the US cannot grow its way out of mounting public debt without tax or spending adjustments. While strong growth helps, she said, it cannot deliver the necessary adjustments quickly enough. The IMF’s Fiscal Monitor warned that delaying action as borrowing costs rise will make the task harder.
2. China and Europe
Georgieva urged China to shift from export-led growth toward domestic consumption, repeating longstanding IMF advice. She said deficit countries need to save more and spend less, while Europe needs to invest more in competitiveness.
3. Rising debt costs
IMF Fiscal Affairs chief Rodrigo Valdes said higher bond yields have left governments with little fiscal room and that the fund had increased the urgency of its message. Georgieva said average debt-service costs for low-income countries had risen to 14% of revenue from 6% a decade ago, even as overall debt burdens eased.
