The International Monetary Fund used its annual meetings in Bangkok on Wednesday to press both Washington and Beijing. Managing director Kristalina Georgieva said US authorities accept that deficits and debt, now above $40 trillion, are too high, but are relying mainly on strong growth to bring them down. Growth helps, she said, but in the Fund’s view it cannot deliver the needed adjustment fast enough, so fiscal measures will also be necessary.
The message was reinforced by the Fund’s Fiscal Monitor, published the same day, which warned that delaying consolidation while borrowing costs stay high only makes the task harder. Fiscal affairs chief Rodrigo Valdes said the surge in bond yields has left governments little room to manoeuvre, and that the Fund had deliberately raised the urgency of its message. Georgieva described advanced economies, the US and Europe in particular, as the worst offenders on excessive debt, with their higher yields raising debt service costs for low income countries, where servicing now takes about 14 percent of revenue, up from 6 percent a decade ago.
For China, on a day when its data pointed to a record trade surplus, Georgieva repeated the Fund’s longstanding advice to lift domestic consumption and rely less on exports. In her summary, China needs to spend more, the United States needs to save more, and Europe needs to invest more. ECB president Christine Lagarde, asked in Bangkok about France, said Paris must calm investors through its own fiscal policy, playing down talk of an ECB intervention. Treasury Secretary Scott Bessent is not attending the Bangkok meetings, citing domestic engagements; his written statement to the meetings stressed a pro-growth agenda and a return to core missions for the Fund and the World Bank.