US Treasury Dismisses IMF Warning on Debt, Citing Forecast Inaccuracies

David Zervos, counselor to the U.S. Treasury Secretary, dismissed the International Monetary Fund's (IMF) debt warning on Thursday, stating that the IMF's forecasts have been messy in the past.

Zervos's comments came in response to IMF Managing Director Kristalina Georgieva, who cautioned on Wednesday during the IMF-World Bank annual meetings in Bangkok that strong U.S. economic growth alone would not be sufficient to put mounting federal debt on a sustainable course. Georgieva urged the U.S. and other wealthy nations to urgently tackle rising global debt levels, which she said strain the global financial system and disproportionately affect low-income countries.

Georgieva had previously responded to U.S. Georgieva asserted that growth, of course, helps, but it cannot deliver fast enough the necessary adjustments, and that "There is no magic," implying other measures are needed to bring down the deficit. Rodrigo Valdes, director of the IMF’s Fiscal Affairs Department, noted that fiscal risks are rising, and a proper reaction is largely absent in many countries.

Global debt surpassed $365 trillion in the first half of the year. Rising debt levels and global inflation, partly fueled by high energy costs from the Iran war, have pushed interest rates to multidecade highs. UNDP head Alexander de Croo warned that millions could face poverty due to surging energy costs, the El Nino phenomenon, and higher interest rates.

The U.S. Treasury, through Zervos, directly challenged the IMF's assessment of U.S. fiscal policy and its forecasting record, citing examples like the 2008 global contraction and the 1997 Southeast Asia collapse. The IMF, however, maintains that global growth's resilience is heavily reliant on AI technology investments, leaving poorer countries struggling.