IMF chief Kristalina Georgieva called on U.S. policymakers Thursday to leverage the nation’s post-pandemic recovery to address the ballooning deficit. She emphasized the need to set the national deficit on a “decisive downward path,” cautioning that investor confidence in U.S. Treasuries might wane without such measures.
Praising the stimulus efforts of both President Biden and former President Trump, Georgieva highlighted the enduring benefits of these policies.
However, she stressed the importance of complementing these initiatives with deficit-reduction strategies. “This legislation will have a lasting positive impact on reshaping the U.S. economy.
It needs to be complemented with actions to put public debt-to-GDP on a decisive downward path,” she stated at a press conference.
Georgieva recommended targeting savings in non-entitlement spending, steering clear of essential programs like Social Security and Medicare. She clarified that the timeframe for deficit reduction isn’t immediate but should be spread out over the decade. “We are proposing a fairly long period for these reductions. We’re talking about within this decade, not next year,” she explained.
Despite the Federal Reserve’s higher interest rates, which have increased the cost of servicing the national deficit, Georgieva described these costs as “quite manageable.” IMF Western Hemisphere Director Rodrigo Valdés reassured, “We’re far from any rollover risk in the U.S.”
The IMF’s inflation outlook for the U.S. is more optimistic than the Fed’s, predicting a return to 2% by mid-next year, compared to the Fed’s 2026 estimate. “Last year, we were more optimistic. Last year, we were proven right,” Georgieva remarked.
Addressing broader economic sentiments, Georgieva acknowledged dissatisfaction with globalization in the U.S. and Europe. She pointed out that while globalization has generally been positive, it has also had adverse effects on some communities.
“Decades of globalization have led to overall positive outcomes but negative consequences for some communities, including here in the United States, with jobs disappearing due to cheap imports.
We’ve been somewhat complacent about that unfairness,” she noted.
As the U.S. navigates its economic future, the IMF’s message is clear: fiscal prudence and strategic planning are crucial to maintaining stability and growth.
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