Latest news with #debtburden
Bloomberg
10 hours ago
- Business
- Bloomberg
Moody's Downgrades Colombia Citing Suspension of Fiscal Rule
Moody's Ratings downgraded Colombia's credit score to Baa3, citing the worsening debt burden and the decision to suspend the fiscal rule which curbed government borrowing. Moody's cut the score one notch from Baa2. The outlook is stable.
Asharq Al-Awsat
22-05-2025
- Business
- Asharq Al-Awsat
IMF Urges US to Curb Deficit, Tackle its ‘Ever-Increasing' Debt Burden
A top IMF official has called on the US to reduce its fiscal deficit and tackle its 'ever-increasing' debt burden at a time of rising concerns about President Donald Trump's plans for sweeping tax cuts. 'The US fiscal deficits are too large and they need to be brought down,' Gita Gopinath, the IMF's first deputy managing director, told the Financial Times this week. She also warned that the world's biggest economy was still affected by 'very elevated' trade policy uncertainty despite 'positive developments', such as the Trump administration dialing back tariffs on China. Gopinath's comments came after Moody's stripped the US of its last remaining pristine triple A credit rating owing to concerns over the country's growing debt. Trump's proposal to prolong his 2017 tax cuts beyond this year has added to those worries and prompted unease among investors. The administration says the cuts — combined with deregulation — will pay for themselves with higher growth, but neither Moody's nor financial markets are convinced. The rating agency said last week that the proposed legislation, which Trump calls 'the big, beautiful bill', would raise US deficits from 6.4% last year to just under 9% by 2035. Treasury secretary Scott Bessent told NBC on Sunday that the Moody's downgrade was 'a lagging indicator', blaming the fiscal situation on the Biden administration. He added that the administration was 'determined to bring the spending down and grow the economy.' Bessent previously said he would cut the deficit to 3% by the end of Trump's term. But Gopinath noted that US debt to GDP was 'ever-increasing', adding: 'It should be that we have fiscal policy in the US that is consistent with bringing debt to GDP down over time.' The federal government debt held by the public amounted to 98% of GDP in fiscal 2024, compared with 73% a decade earlier, according to the Congressional Budget Office. Although the IMF said last month that it expected the US fiscal deficit to fall this year as long as tariff revenues grew, those projections did not account for Trump's tax bill, which is winding its way through Congress. Gopinath added that Bessent had been right to make a 'clear call' to bring down fiscal deficits. Trump is pressuring Republicans in the House of Representatives, where he has a slim majority, to support the legislation, arguing that doing otherwise would increase voters' tax bills. Deficit worries and Moody's downgrade have driven the dollar lower and pushed prices down and yields up in the Treasury market. The 30-year Treasury bond yield on Monday rose to 5.04%, its highest level since 2023. A bigger deficit means the government will have to sell more bonds at a time when foreign and domestic investors have begun to question the stability of the US market. The IMF in April cut its US growth forecast by nearly a percentage point to 1.8 per cent in 2025, while dropping its global growth projection to 2.8%, as it incorporated the impact of Trump's tariffs. Since then, Trump has announced sharp cuts to American levies, as China and the US agreed to slash respective tariffs by 115 percentage points for 90 days.
Reuters
21-05-2025
- Business
- Reuters
IMF's Gopinath urges US to curb fiscal deficit, FT reports
May 21 (Reuters) - International Monetary Fund First Deputy Managing Director Gita Gopinath said U.S. fiscal deficits are too large and the country needs to tackle its "ever-increasing" debt burden, according to an interview published by the Financial Times on Wednesday. Gopinath told the FT that the U.S. was still impacted by "very elevated" trade policy uncertainty despite positive developments such as President Donald Trump's administration rolling back tariffs on China and striking a U.S.-UK economic deal. In April, the IMF slashed its U.S. growth forecast along with most other countries over the impact of U.S. tariffs, while warning that further trade tensions would slow growth further. "It is absolutely a positive to have lower average tariff rates than the ones we assumed in [April] . . . but there is a very high level of uncertainty, and we have to see what the new rates will be," Gopinath told the FT. The comments came as Trump is proposing to extend tax cuts passed in his first term in 2017 and to add new tax breaks. Moody's also downgraded the U.S. sovereign credit rating last week due to concerns about the nation's growing, $36 trillion debt pile. The ratings agency cited the failure of successive U.S. administrations and Congress to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs.
