Economy 4 min read By Callum Montgomery
IMF chief warns US growth alone cannot fix $40tn debt
Kristalina Georgieva says economic growth cannot deliver the necessary fiscal adjustment fast enough, as the US national debt hits a record $40.3tn and the Treasury pushes back on the IMF's forecasting record.
The head of the International Monetary Fund has warned that faster economic growth will not be enough on its own to resolve the United States' mounting debt burden, as the country's national debt passes $40tn for the first time.
Speaking during the IMF's annual meetings in Bangkok, managing director Kristalina Georgieva said growth could help ease the pressure but could not deliver the scale of adjustment required. «Growth, of course, helps but it cannot deliver fast enough the necessary adjustments,» she said, adding that the budget deficit must also be brought down.
Her intervention came as Treasury data put the national debt at $40.3tn, a record high and the largest sovereign debt in the world. The gross debt-to-GDP ratio stands at about 126%, while publicly held debt is equivalent to 100% of GDP — the highest level since shortly after the Second World War, according to the Committee for a Responsible Federal Budget.
The Treasury rejected the IMF's assessment, questioning the fund's forecasting record. David Zervos, a counsellor to Treasury Secretary Scott Bessent, pointed to optimistic projections made before the 2008 global financial crisis and the 1997 Asian financial crisis. «When we see pieces on the IMF, it's good to remember how messy their forecasts have been in the past,» he said. The IMF did not immediately respond to a request for comment.
The exchange highlights a widening disagreement over how to address America's fiscal position. Bessent has argued that sustained US growth of 3%, partly driven by artificial intelligence, can be sufficient to manage the debt. «There's nothing magic about the $40 trillion number,» he told CNBC in August. «And we can grow our way out of that.»
Whether growth alone can solve the problem is doubtful. The United States has reached 3% annual growth in only five calendar years, most recently in 2019. GDP is estimated to grow 2.2% this year, up from 2% in 2025. Congressional Budget Office director Phillip Swagel has said it is «probably not plausible» that growth will stabilise the financial trajectory, noting that real GDP growth would need to reach 5% to 6%. Changes to revenue and spending are necessary instead, he said.
The debt burden is already reshaping federal priorities. Net interest payments accounted for about 15% of federal spending in fiscal 2026 and about 20% of revenue. By fiscal 2031, the Committee for a Responsible Federal Budget has predicted that the average interest rate on federal debt will exceed the economy's growth rate — a situation that could contribute to a self-reinforcing debt spiral and eventually require more drastic spending cuts or tax increases.
The IMF has previously raised concerns about the US fiscal path. In an annual review published in April, its executive directors acknowledged the strength of the US economy but warned that the growing debt posed a risk not only to the United States but to the rest of the world, given the central role of the US Treasury market in the global financial system. They described the fiscal trajectory as creating a growing financial stability tail risk.
Bessent has said he and White House budget director Russ Vought are working with President Donald Trump on a broader deficit-reduction plan, but no details have been released. The standoff leaves open the question of how Washington intends to bring down borrowing at a time when interest costs are consuming an increasing share of government revenue.
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