The International Monetary Fund on Wednesday called on the United States to reduce its growing fiscal deficit as the best way to bring down current account and trade deficits that it views as too large, sharing some concerns with the Trump administration.
IMF Managing Director Kristalina Georgieva told reporters following the IMF’s annual review of U.S. policies that “the conclusion is that the current account deficit is too big, to make it very simple for the audience. And that is recognized by the administration.”
After the U.S. Supreme Court struck down President Donald Trump’s broad emergency tariffs as illegal, his administration has invoked Section 122 of the Trade Act of 1974 for replacement tariffs, intended to improve the balance of payments.
But IMF Western Hemisphere Director Nigel Chalk said that the best way to bring down the current account deficit, estimated by the IMF at 3.5% to 4.0% of GDP in the near term, would be to reduce the U.S. fiscal deficit.
The IMF said in its first “Article IV” review of the Trump administration’s policies that U.S. growth for 2026 would remain at a resilient 2.4% rate, in line with its January forecasts, while inflation would not return to the Federal Reserve’s 2% target until early 2027, given uncertainty around the inflation and growth path.
But the Fund said that U.S. fiscal deficits would remain between 7% and 8% of GDP in coming years, more than twice the levels targeted by U.S. Treasury Secretary Scott Bessent, and consolidated general government debt would reach 140% of GDP by 2031.
“While the risk of sovereign stress in the U.S. is low, the upward path for the public debt-GDP ratio and increasing levels of short-term debt-GDP represent a growing stability risk to the U.S. and global economy,” the IMF said in its initial Article IV statement.
(Reuters)
