International Monetary Fund issues warning on debt

April 13, 2011

This week, the International Monetary Fund (IMF) reported that the United States’ deficit is set to out-grow that of any other developed nation while warning that the U.S. has taken no substantive action to reduce spending.

Moreover, the IMF asserted that tax and spending reforms currently being considered are less than half of what is necessary to stabilize the deficit.

The Financial Times reports:

The US lacks a “credible strategy” to stabilise its mounting public debt, posing a small but significant risk of a new global economic crisis, says the International Monetary Fund.

In an unusually stern rebuke to its largest shareholder, the IMF said the US was the only advanced economy to be increasing its underlying budget deficit in 2011, at a time when its economy was growing fast enough to reduce borrowing.

To meet the 2010 pledge by the Group of 20 countries for all advanced economies – except Japan – to halve their deficits by 2013, the US would need to implement tougher austerity measures than in any two-year period since records began in 1960, the IMF said.

The IMF recommended that the United States make a significant down payment on its debt and consider serious reforms to both Social Security and taxation, while stating that the economy is stable enough to withstand the necessary reforms.


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