IMF Urges U.S. to Cut Fiscal Deficit to Reduce Trade and Current Account Gaps

The International Monetary Fund (IMF) has urged the United States to address its rising fiscal deficit as a key step toward narrowing the country’s large current account and trade deficits. Following its annual Article IV review of U.S. economic policies, IMF Managing Director Kristalina Georgieva stated that the current account deficit remains “too big,” a concern that is also acknowledged by the Trump administration.

The IMF estimates the U.S. current account deficit will range between 3.5% and 4.0% of GDP in the near term. While the administration has explored trade measures to correct external imbalances, including invoking Section 122 of the Trade Act of 1974 after the U.S. Supreme Court struck down broad emergency tariffs, IMF officials emphasized that fiscal reform would be more effective. Nigel Chalk, Director of the IMF’s Western Hemisphere Department, noted that reducing the federal fiscal deficit would have a stronger and more sustainable impact on lowering the current account gap.

According to the IMF’s latest economic outlook, U.S. economic growth is expected to remain resilient at 2.4% in 2026, consistent with earlier projections. However, inflation is not forecast to return to the Federal Reserve’s 2% target until early 2027, reflecting ongoing uncertainty surrounding price pressures and economic momentum.

The report also highlights growing concerns over U.S. government debt. Fiscal deficits are projected to remain between 7% and 8% of GDP in the coming years—more than double the levels targeted by Treasury Secretary Scott Bessent. Meanwhile, consolidated general government debt is expected to climb to 140% of GDP by 2031.

Although the IMF considers the risk of sovereign stress in the United States to be low, it warned that the steady rise in public debt and increasing short-term debt levels could pose long-term stability risks to both the U.S. and global economy.