Updated April 21st, 2024 at 11:20 IST

IMF calls for US revenue enhancement, social security reform

During a fiscal forum, Gita Gopinath, First Deputy Managing Director of the IMF, emphasised the urgency for the United States to tackle its high budget deficits

Reported by: Business Desk
IMF | Image:Shutterstock
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US revenue focus: The United States must focus on boosting its revenue streams according to Gita Gopinath, First Deputy Managing Director of the International Monetary Fund.  During a fiscal forum at the IMF and World Bank spring meetings, Gopinath stressed the need for the United States to address its high budget deficits. Despite these deficits contributing to global growth by stimulating domestic demand within the US, Gopinath stressed the importance of raising revenues to tackle the issue.

Gopinath pointed out that US deficits are projected to escalate over the years, with the country witnessing one of the sharpest increases in debt. While these deficits support growth and demand within the US, they also lead to higher interest rates and a stronger dollar, posing challenges for the global economy.

According to the IMF's fiscal monitor, the US deficit is estimated to reach 6.67 per cent of GDP in 2024, rising to 7.06 per cent in 2025, which is double the 3.5 per cent recorded in 2015.

Economic policy recommendations

In its upcoming annual "Article IV" review of US economic policies, the IMF is expected to recommend revenue-raising measures and reforms to address costly programs like Social Security and Medicare. These recommendations align with last year's prescriptions, which were issued amid tensions in the US Congress regarding the federal debt ceiling.

Gopinath stressed the importance of finding a resolution to the recurring issue of debt ceiling brinkmanship, stating that it poses unnecessary risks to the global financial markets.

Regarding concerns about a widespread debt crisis in developing countries, Gopinath stated that while some low-income countries are facing debt distress, there isn't an imminent threat of a systemic debt crisis. She noted that financial market conditions have slightly improved, with some frontier market countries returning to borrowing from markets.

(With Reuters Inputs)

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Published April 21st, 2024 at 11:20 IST