The International Monetary Fund (IMF) has issued a stark warning over the trajectory of United States public finances, cautioning that the country’s national debt-now exceeding $38 trillion-poses mounting risks not only to domestic economic stability but also to the broader global financial system. According to the IMF’s latest Article IV consultation, US public debt is projected to climb to 140% of gross domestic product (GDP) by 2031 if current fiscal policies remain unchanged.

For policymakers in Washington and observers worldwide-including analysts and journalists in emerging economies like Bangladesh-this assessment is not merely a technical fiscal note. It is a signal about systemic vulnerabilities in the world’s largest economy and issuer of the global reserve currency.

US national debt has surged past $38 trillion, reflecting a $2.25 trillion increase over the past year alone. Projections suggest it may approach $39 trillion by April. The fiscal deficit-the gap between government spending and revenues-has also widened significantly. It expanded from approximately $1.4 trillion in fiscal year 2022 to about $1.8 trillion last year, according to IMF data.

These figures illustrate a structural imbalance rather than a temporary cyclical deviation. Persistent primary deficits, combined with rising interest costs due to higher benchmark rates, are driving debt accumulation at an accelerated pace. As the debt-to-GDP ratio rises, so does the government’s interest burden, creating a feedback loop: higher debt leads to higher borrowing costs, which in turn inflate deficits further.

IMF Managing Director Kristalina Georgieva underscored the severity of the issue, describing the US current account deficit as “too big.” Her remarks point to interconnected imbalances-fiscal, trade, and external-that reinforce one another. A large fiscal deficit contributes to a widening current account gap, increasing reliance on foreign capital inflows.

A projected 140% debt-to-GDP ratio by 2031 would place the United States among the world’s most indebted advanced economies. While high debt levels do not automatically trigger crises-especially for a country issuing debt in its own currency-they significantly reduce fiscal flexibility.

In practical terms, this means:

1. Reduced Policy Space: In the event of another recession or financial shock, Washington may find it more difficult to deploy aggressive fiscal stimulus without exacerbating market concerns.
2. Higher Interest Costs: As debt grows, investors may demand higher yields to compensate for perceived risk, raising borrowing costs across the economy.
3. Spillover Effects: US Treasury securities are foundational to global financial markets. Rising US yields can transmit tightening financial conditions worldwide, affecting emerging markets disproportionately.

For developing countries such as Bangladesh, higher US interest rates often strengthen the dollar, intensify capital outflows, and increase the cost of servicing dollar-denominated debt. Thus, the IMF’s warning carries implications far beyond US borders.

The IMF also emphasized the need for the United States to engage constructively with its trading partners to address concerns over unfair trade practices and reduce distortions arising from tariffs and industrial policy measures. It called for coordinated reductions in trade restrictions and cautioned that national security–related measures should be narrowly applied.

This commentary is particularly relevant given recent trade policy volatility, including tariffs introduced during the presidency of Donald Trump. Although the IMF’s report was drafted before the Supreme Court of the United States struck down many of those tariffs, the institution signaled it would evaluate the ruling’s broader economic consequences.

Trade restrictions and export controls can amplify fiscal and external imbalances by raising input costs, disrupting supply chains, and provoking retaliatory measures. Over time, such dynamics may dampen productivity growth and increase inflationary pressures.

Despite fiscal concerns, the IMF projects US economic growth will remain resilient at 2.4% in 2026. However, inflation is not expected to return to the Federal Reserve’s 2% target until early 2027. This prolonged disinflation timeline suggests that monetary policy may remain restrictive for longer than markets anticipate.

The interplay between fiscal expansion and monetary tightening is critical. If fiscal deficits remain large while the Federal Reserve attempts to contain inflation through higher interest rates, policy coordination challenges intensify. Elevated rates increase government interest expenditures, worsening the deficit and compounding debt accumulation.

US public debt remains widely regarded as a global safe asset. Treasury securities underpin international reserves, serve as collateral in global financial transactions, and establish benchmark yields for a wide range of financial instruments. This privileged position has historically allowed the US to borrow at comparatively low costs.

However, safe-asset status is not immune to erosion. Persistent fiscal deterioration could gradually undermine investor confidence, particularly if political gridlock impedes credible consolidation plans. While an abrupt loss of confidence is unlikely in the near term, incremental shifts in portfolio allocation could have cumulative effects.

For global markets, even modest upward movements in US Treasury yields can reshape capital flows, exchange rates, and risk premiums. Emerging markets, already grappling with volatile capital movements, would face heightened vulnerability.

The IMF advocates a “clear fiscal consolidation plan” to place debt on a sustainable downward path. Such a plan would likely involve a combination of revenue enhancement and expenditure rationalization. Options might include:

• Reforming entitlement programs to address long-term demographic pressures.
• Broadening the tax base and improving tax compliance.
• Phasing out inefficient subsidies.
• Prioritizing growth-enhancing investments in infrastructure and innovation.

Politically, however, implementing these measures is challenging. Fiscal consolidation often encounters resistance due to its short-term economic and social trade-offs. Yet delaying adjustment increases the scale of future corrections required.

The United States occupies a unique position in the global financial architecture. Its fiscal trajectory influences global liquidity, risk sentiment, and policy synchronization. As such, the IMF’s warning is less about imminent crisis and more about systemic sustainability.

For policymakers and economic observers in South Asia, the message is instructive. Fiscal prudence, debt sustainability frameworks, and balanced external accounts are not merely academic objectives-they are essential for resilience in an interconnected global system.

Moreover, the US case illustrates that even advanced economies with deep capital markets are not immune to long-term structural imbalances. The credibility of institutions, transparent fiscal planning, and international coordination remain indispensable.

The IMF’s latest assessment of US public debt is a sobering reminder of the structural challenges facing the world’s largest economy. With debt projected to reach 140% of GDP within five years, rising deficits, and persistent current account imbalances, the path forward requires deliberate and credible fiscal reform.

While the US retains unparalleled financial advantages, those advantages do not negate arithmetic realities. Sustainable growth depends on restoring balance between expenditure commitments and revenue capacity, as well as maintaining cooperative international economic relations.

For global stakeholders-including emerging economies monitoring shifts in US monetary and fiscal policy-the trajectory of American debt is more than a domestic issue. It is a central variable in the stability of the international financial system.

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