IMF chief urges US and wealthy nations to rein in debt to ease global economic pressure

The U.S. and oth­er wealthy na­tions need to ur­gent­ly tack­le mount­ing glob­al debt lev­els that are weigh­ing most heav­i­ly on low-in­come coun­tries and strain­ing the glob­al fi­nan­cial sys­tem, the head of the In­ter­na­tion­al Mon­e­tary Fund said Wednes­day.

IMF Man­ag­ing Di­rec­tor Kristali­na Georgie­va said Trea­sury Sec­re­tary Scott Bessent and oth­er U.S. lead­ers rec­og­nize that the fed­er­al deficit and na­tion­al debt are too high. But eco­nom­ic growth alone would not be enough to ad­dress the coun­try’s more than $40 tril­lion in na­tion­al debt, she said.

Mean­while, ris­ing bond yields, re­flect­ing high­er pre­mi­ums de­mand­ed by in­vestors for tak­ing on greater risk, have been dis­rupt­ing fi­nan­cial mar­kets.

“We be­lieve that growth, of course, helps, but it can­not de­liv­er fast enough the nec­es­sary ad­just­ments,” Georgie­va said at the au­tumn meet­ing of the IMF and World Bank in Bangkok.

At a news con­fer­ence, IMF Man­ag­ing Di­rec­tor Kristali­na Georgie­va says just try­ing to grow the U.S. econ­o­my out of its more than $40 tril­lion in na­tion­al debt would not suf­fice.

“There is no mag­ic,” she said, adding that oth­er mea­sures would be need­ed. “You have to go in a di­rec­tion of tight­en­ing, bring­ing it down, bring­ing the deficit down.”

‘Fis­cal con­sol­i­da­tion’ faces chal­lenges

Ris­ing debt lev­els and glob­al in­fla­tion, part­ly re­sult­ing from high en­er­gy costs due to the Iran war, have pushed in­ter­est rates to mul­ti­decade highs, adding to the bur­dens of the world’s poor­est na­tions.

Ef­forts to bring debt un­der con­trol with what Georgie­va and oth­er ex­perts call “fis­cal con­sol­i­da­tion” have suf­fered set­backs from heavy spend­ing dur­ing the COVID-19 pan­dem­ic and since.

“Fis­cal risks are ris­ing, and a prop­er re­ac­tion is large­ly ab­sent in many coun­tries,” said Ro­dri­go Valdes, di­rec­tor of the IMF’s Fis­cal Af­fairs De­part­ment. “And in ma­jor ad­vanced economies, the ef­fect of fis­cal in­dis­ci­pline does not stop at the bor­der. It trav­els to the rest of the world.”

“Among the world’s poor­est coun­tries, in­ter­est pay­ments have reached his­toric highs rel­a­tive to rev­enue, and de­clin­ing amounts of aid are cre­at­ing gaps that some coun­tries have been un­able to fi­nance,” the IMF’s lat­est Fis­cal Mon­i­tor said.

That is forc­ing coun­tries to make hard choic­es be­tween sup­port­ing their most vul­ner­a­ble peo­ple and meet­ing their debt re­pay­ment oblig­a­tions.

“The Glob­al South is pay­ing the price for ris­ing in­ter­est rates in wealth­i­er coun­tries,” U.K. For­eign Sec­re­tary Ed Miliband said at an event on the side­lines of the IMF meet­ings.

“We need a new deal on debt, a deal that sup­ports coun­tries to re­pay over longer time hori­zons and, cru­cial­ly, re­fi­nanc­ing with bet­ter rates to give de­vel­op­ing coun­tries pre­cious fis­cal space,” he said.

Na­tions need help with job cre­ation and in­vest­ment

The me­di­an de­vel­op­ing coun­try pays three times as much in in­ter­est as de­vel­oped coun­tries, said Alexan­der De Croo, for­mer Bel­gian prime min­is­ter and ad­min­is­tra­tor of the Unit­ed Na­tions De­vel­op­ment Pro­gramme (UNDP).

On av­er­age, near­ly 10% of gov­ern­ment spend­ing goes to­ward debt re­pay­ments. High fu­el and fer­til­iz­er prices, the ef­fects of the El Niño weath­er phe­nom­e­non and ris­ing bor­row­ing costs have left many low-in­come coun­tries with lit­tle room to re­cov­er.

“I mean, we don’t see re­al­ly a light at the end of the tun­nel,” De Croo told The As­so­ci­at­ed Press.

Cre­at­ing jobs is an­oth­er top pri­or­i­ty, par­tic­u­lar­ly as the grow­ing use of ar­ti­fi­cial in­tel­li­gence threat­ens to make many tra­di­tion­al oc­cu­pa­tions ob­so­lete. More than 1.2 bil­lion young peo­ple are ex­pect­ed to en­ter the glob­al work­force over the next decade or so, while fore­casts sug­gest on­ly 400 mil­lion net new jobs will be cre­at­ed.

The UNDP this week an­nounced its “Jobs for Pros­per­i­ty” ini­tia­tive to bring to­geth­er gov­ern­ments, de­vel­op­ment banks — such as the World Bank — and pri­vate busi­ness­es to en­cour­age in­vest­ment in sec­tors such as tourism, health­care and food pro­cess­ing.

The ini­tia­tive and re­lat­ed ef­forts will help coun­tries at­tract in­vest­ment by strength­en­ing gov­er­nance and poli­cies and de­vel­op­ing pipelines of “in­vestible projects,” De Croo said. “These are things that are fea­si­ble. It’s been proven that you can do it in many places of the world,” he added.

Sep­a­rate­ly, the IMF, Bank of Thai­land and World Bank Group an­nounced a “Bangkok Blue­print” on Wednes­day to com­bat cy­ber­crime, fi­nan­cial fraud and on­line scams.

The an­nounce­ment came a day af­ter cy­ber­at­tacks caused re­frig­er­a­tion sys­tems to over­heat at hun­dreds of stores in France. —BANGKOK (AP)

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Sto­ry by ELAINE KURTEN­BACH | As­so­ci­at­ed Press

As­so­ci­at­ed Press jour­nal­ists Haru­ka Nu­ga and Tian Macleod Ji con­tributed to this re­port.