The International Monetary Fund is meeting in Washington this week, in part to discuss the growing public debt, which is expected to exceed $100 trillion this year.
“Our forecasts point to an unforgiving combination of low growth and high debt — a difficult future… Governments must work to reduce debt and rebuild buffers for the next shock — which will surely come, and maybe sooner than we expect,” IMF Managing Director Kristalina Georgieva said in a speech on October 17, per Bloomberg.
In an early preview of the International Monetary Fund’s (IMF) forthcoming report, the group stressed that debt mismanagement in critical economies can spread elsewhere.
“Elevated debt levels and uncertainty surrounding fiscal policy in systemically important countries, such as China and the United States, can generate significant spillovers in the form of higher borrowing costs and debt-related risks in other economies,” stated the fund.
According to the IMF, global public debt is predicted to reach 93% of global gross domestic product by the end of 2024. By the end of the decade, the fund forecasts it will hit 100%, surpassing the 99% level it reached during the COVID-19 pandemic lockdowns. In a severe scenario, debt levels could accelerate even faster, reaching 115% of GDP in as little as three years.
In fiscal 2024, the U.S. budget deficit increased to $1.833 trillion. This represents the third-highest annual deficit on record and the most significant outside of the pandemic period. Critically, for the first time, interest on the federal debt exceeded $1 trillion, driven by the rapid acceleration of interest rates in recent years.
As previously detailed in The Dallas Express, the Federal Reserve hiked rates aggressively from 0.25% in March 2022 to 5.5% in July 2023 in an attempt to suppress accelerating inflation. While the Fed has since pulled back, cutting rates half a percentage point in September, rates remain high at 5%. As a result, interest payments on U.S. debt remain elevated.
Last month, Elon Musk took to his social media platform X, formerly Twitter, to highlight how significant America’s debt servicing has become.
“Interest payments on just federal government debt now exceed the entire Defense Department budget!… America is in the fast lane to bankruptcy,” posted Musk on September 11.