CNBC_ US Department of the Treasury advisor David Zervos criticized the International Monetary Fund's warnings regarding the public finance situation in the United States, considering that the Fund should review its economic forecasting record before criticizing US fiscal policies, according to statements he made to the CNBC network on Thursday.
Zervos's statements came in response to IMF Managing Director Kristalina Georgieva, who said during the annual meetings of the IMF and the World Bank in Bangkok that strong economic growth alone will not be enough to put the rising US debt on a sustainable path, calling for additional fiscal measures to address the problem.
Georgieva was, in turn, responding to statements by US Treasury Secretary Scott Bessent, who said in August that the United States is capable of reducing the debt-to-GDP ratio by achieving strong economic growth, after government debt exceeded the $40 trillion level.
US Treasury advisor David Zervos stated that the IMF's forecasts have been characterized by chaos at many historical junctures, pointing out that in 2008 the Fund predicted 3% global growth, before the world witnessed a widespread economic contraction the following year.
He added that the Fund was optimistic toward Southeast Asian economies prior to the 1997 crisis, and also adopted a negative outlook toward the Russian economy in 2022, while Russian growth subsequently rebounded, as he put it.
Zervos also pointed to Argentina's experience following its $57 billion bailout program, explaining that the country subsequently faced financial difficulties again, and criticized the Fund's stance on US inflation when it previously described it as transitory.
A number of economists have warned that rising interest payments and high fiscal deficits increase the risks of the United States entering a debt spiral that is difficult to contain, despite ongoing disagreement over the prospects of the situation turning into a genuine financial crisis.
IMF Managing Director Kristalina Georgieva expanded the scope of her warnings to include other major economies, calling on governments to enhance fiscal discipline and reduce public debt levels.
Other international economic institutions have also warned of the increasing costs of global debt servicing, after total global debt exceeded the $365 trillion level during the first half of the year.
