IMF calls for US to cut deficits amid bond woes, urges China to shift away from exports
TLT•IMF Managing Director Kristalina Georgieva said the US needs fiscal measures to curb debt and deficits, while China should shift toward domestic consumption. The IMF warned that higher bond yields have increased the urgency of budget consolidation worldwide.
1. Calls for fiscal changes
Georgieva said the US cannot rely on growth alone to reduce its debt and deficits, and that fiscal measures are necessary. She urged China to shift from exports toward domestic consumption, while saying the US needs to save more and Europe needs to invest more.
2. Higher borrowing costs
The IMF’s Fiscal Monitor warned that delaying budget consolidation as borrowing costs rise would make adjustments harder. IMF Fiscal Affairs Department head Rodrigo Valdes said higher bond yields had left governments with little room to manoeuvre and that the Fund had increased the urgency of its message.
3. Country-specific concerns
European Central Bank President Christine Lagarde said France’s first solution to investor concerns should be fiscal policy at home. The IMF recommended that Britain stay the course on consolidation, while Georgieva urged members to fully fund IMF facilities for low-income countries, whose average debt-service costs had risen to 14% of revenue from 6% a decade ago.
