Strong growth won't solve US debt

IMF Managing Director Kristalina Georgieva said that U.S. Treasury Secretary Scott Bessent’s plan to boost economic growth as a means of addressing rising public debt and fiscal deficits would not work quickly. Bloomberg News quoted Georgieva as saying, “Authorities rely far too heavily on strong growth in the United States… Of course, growth helps, but it does not deliver the necessary adjustments quickly enough.” Speaking on the sidelines of the IMF’s annual meetings in Bangkok, the Thai capital, she added, “Some measures will be necessary.”

Bessent, who did not attend the current meetings, said the United States would be able to reverse the trajectory of public debt and fiscal deficits through strong economic growth. Last week, Bessent said, “What matters is the ratio of public debt to gross domestic product, and we will begin to change and lower that curve… This can happen very quickly.” He added that sustained GDP growth exceeding 3%, which is the target for the fourth quarter of this year, would help ensure that this goal is met.

This comes as U.S. debt is heading toward unprecedented levels, a key reason behind the sharp rise in long-term borrowing costs that has sparked global concerns. When asked about the U.S. public debt crisis, European Central Bank President Christine Lagarde referred to statements on fiscal policy in Washington. Lagarde said, “I heard the IMF Managing Director focus heavily on the fiscal principles that should be respected,” referring to the size of the U.S. deficit. She added, “It is clear that this is a problematic issue, and it is a matter that any country in that specific category must address.”

Last February, the U.S. Congressional Budget Office warned that the U.S. public debt ratio would rise by 2030 to more than the record high of 106% of GDP set in 1946.