IMF's Georgieva: Growth Alone Won't Fix $40 Trillion US Debt

The United States carries more than $40 trillion in national debt, and the head of the International Monetary Fund says economic growth cannot shrink it fast enough. IMF Managing Director Kristalina Georgieva delivered that verdict Wednesday at the autumn meeting of the IMF and World Bank in Bangkok.

Her prescription was blunt. "We believe that growth, of course, helps, but it cannot deliver fast enough the necessary adjustments," Georgieva said. "There is no magic."

The remedy, in her words: "You have to go in a direction of tightening, bringing it down, bringing the deficit down."

Georgieva said Treasury Secretary Scott Bessent and other U.S. leaders already recognize that the federal deficit and national debt are too high. Recognition, however, is not the same as action — and the IMF offered no timeline for when Washington might move.

The warning lands amid rising bond yields, which reflect the higher premiums investors now demand for taking on risk. Those yields have been disrupting financial markets.

What is driving the debt pressure?

Rising debt levels and global inflation — partly a result of high energy costs tied to the Iran war — have pushed interest rates to multidecade highs. The heaviest burden falls on the world's poorest nations.

Efforts to control debt through what Georgieva and other experts call "fiscal consolidation" have suffered setbacks from heavy spending during the COVID-19 pandemic and since.

"Fiscal risks are rising, and a proper reaction is largely absent in many countries," said Rodrigo Valdes, director of the IMF's Fiscal Affairs Department. "And in major advanced economies, the effect of fiscal indiscipline does not stop at the border. It travels to the rest of the world."

The IMF's latest Fiscal Monitor quantified the squeeze: "Among the world's poorest countries, interest payments have reached historic highs relative to revenue, and declining amounts of aid are creating gaps that some countries have been unable to finance."

That arithmetic forces governments to choose between supporting their most vulnerable citizens and meeting debt repayments.

Who pays the price for rich-world rates?

U.K. Foreign Secretary Ed Miliband named the culprit directly. "The Global South is paying the price for rising interest rates in wealthier countries," he said at an event on the sidelines of the IMF meetings.

He called for structural change: "We need a new deal on debt, a deal that supports countries to repay over longer time horizons and, crucially, refinancing with better rates to give developing countries precious fiscal space."

The numbers back him up. The median developing country pays three times as much in interest as developed countries, according to Alexander De Croo, former Belgian prime minister and administrator of the United Nations Development Programme. On average, nearly 10% of government spending in those countries goes toward debt repayments — roughly one dollar in ten before a single school or clinic is funded.

High fuel and fertilizer prices, the effects of the El Niño weather phenomenon and rising borrowing costs have left many low-income countries with little room to recover. "I mean, we don't see really a light at the end of the tunnel," De Croo told The Associated Press.

Can jobs offset the debt squeeze?

A second crisis compounds the fiscal one. More than 1.2 billion young people are expected to enter the global workforce over the next decade or so, while forecasts suggest only 400 million net new jobs will be created. That leaves a gap of 800 million jobs — at a moment when artificial intelligence threatens to make many traditional occupations obsolete.

The UNDP this week announced its "Jobs for Prosperity" initiative to bring together governments, development banks such as the World Bank, and private businesses to encourage investment in tourism, healthcare and food processing.

De Croo said the initiative will help countries attract investment by strengthening governance and policies and developing pipelines of "investible projects." "These are things that are feasible. It's been proven that you can do it in many places of the world," he added.

Whether private capital arrives at the scale the jobs gap demands remains unproven.

Separately, the IMF, the Bank of Thailand and the World Bank Group announced a "Bangkok Blueprint" on Wednesday to combat cybercrime, financial fraud and online scams. The announcement came a day after cyberattacks caused refrigeration systems to overheat at hundreds of stores in France.

The message from Bangkok is that the world's fiscal problems now travel across borders as fast as its cyber threats — and the IMF expects governments, not growth, to carry the fix.