IMF Managing Director Kristalina Georgieva told Treasury Secretary Scott Bessent that relying on growth will not shrink U.S. deficits fast enough. The IMF projects U.S. gross debt reaching 142% of GDP by 2031, while 10-year yields sit near their highest level since 2002.
The head of the International Monetary Fund urged Treasury Secretary Scott Bessent to trim the deficit, warning that his plan to lean on growth to tame U.S. government debt isn't sufficient. Speaking at the IMF-World Bank annual meetings in Bangkok, Georgieva said some fiscal measures would be necessary.
According to CNBC, Georgieva said growth alone falls short: "Growth of course helps, but it cannot deliver fast enough the necessary adjustments." She added that Bessent recognizes deficits and debt have grown too high, but that the authorities very much rely on strong growth.
Bessent bets on 3% growth
Bessent and Trump administration officials have touted resilient economic growth, driven by the artificial-intelligence build-out, reshoring manufacturing and tax cuts for consumers. Last month, Bessent said the U.S. can grow its way out of the problem with 3% growth.
He has argued that sustained growth above 3%, combined with spending restraint, could lower the debt ratio. However, the IMF forecasts U.S. growth of 2.3% in both 2026 and 2027.
Debt pile and yields climb
U.S. federal debt has exceeded 100% of gross domestic product, and the public debt load has surpassed $40 trillion. The budget figures for the fiscal year that ended Sept. 30 have not yet been released, but the deficit is expected to top 6% of GDP, compared with 5.8% in fiscal 2025.
Federal spending helped stave off a recession but also fueled inflation that still weighs on American households and businesses, according to CNBC.
The Treasury market has been battered this year. Benchmark 10-year yields stood at around 5.2% on Wednesday, near their highest level since 2002, as investors bet that surging energy costs and heavy AI spending will keep borrowing costs higher.
Bessent reportedly missed this week's meetings to attend to domestic engagements.
Source: CNBC
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