IMF Warns US Debt Crisis Needs Fiscal Action, Urges China to Boost Consumption

The International Monetary Fund (IMF) has warned that the United States cannot rely solely on economic growth to reduce its mounting national debt, urging Washington to introduce fiscal adjustments. Meanwhile, China must strengthen domestic consumption to reduce its dependence on exports and address global trade imbalances.

Speaking Wednesday at the IMF and World Bank annual meetings in Bangkok, IMF Managing Director Kristalina Georgieva called for stronger economic reforms across major economies as rising borrowing costs and government debt threaten global financial stability.

Georgieva identified the United States and European economies as major contributors to excessive public debt. She emphasized that higher bond yields are also placing additional financial pressure on developing countries.

Although US Treasury Secretary Scott Bessent recognizes the need to address America's growing fiscal deficit, Georgieva said Washington's strategy remains heavily dependent on economic expansion.

The IMF believes stronger growth can support debt reduction but cannot deliver the necessary improvements quickly enough without additional tax or spending measures.

The warning follows the IMF's latest Fiscal Monitor report, which highlighted the growing urgency of fiscal consolidation amid elevated interest rates and borrowing costs.

Rodrigo Valdes, director of the IMF's Fiscal Affairs Department, said rising government bond yields have significantly reduced policymakers' flexibility, making fiscal reforms increasingly urgent.

Bessent is absent from the Bangkok meetings despite the United States holding this year's Group of 20 presidency. His absence comes as President Donald Trump's administration focuses on domestic economic priorities ahead of the US midterm elections.

Attention has also turned toward China's export-driven economy, with recent trade figures indicating the country is approaching a record trade surplus.

Georgieva urged Beijing to stimulate household spending and transition toward consumption-led economic growth. She also recommended greater savings in deficit economies and increased competitiveness investments across Europe.

Beyond major economies, the IMF chief called for stronger international financial assistance to vulnerable countries facing rising debt-servicing costs.

She urged member nations to fully support the IMF's Poverty Reduction and Growth Trust and Catastrophe Containment and Relief Trust, which provide concessional financing and debt relief.

According to Georgieva, debt-service payments among vulnerable economies have climbed to an average of 14% of government revenue, compared with 6% a decade earlier.

She warned that widening economic disparities, including unequal benefits from artificial intelligence investment, could further disadvantage poorer nations unless governments strengthen financial support and implement sustainable fiscal policies.