At last week’s IMF/World Bank Oct. 9-15 meetings in Marrakech, Morocco, IMF officials warned that the United States is piling on unsustainable debt on top of Federal debt, and is in the worst fiscal situation of any nation in the world. The statements, particularly from IMF Economic Counsellor and Director of the Research Department Pierre-Olivier Gourinchas in his press briefing Oct. 10, will further tie up budget negotiations in Congress if they are read there.
Gourinchas said not only that the U.S. debt situation is precarious ("the most worrying of all the world’s countries"), but that corporate defaults are up dramatically from 2022 to 2023. According to S&P Global data which quantify what he said, corporate defaults in 2023 through August, and in the month of August alone, were higher than in any year since the “Great Recession” of 2009. And for credit cards and auto loans, defaults on the sub-prime categories are now at 4-5%.
On Oct. 11, the IMF’s Fiscal Affairs Director Vitor Gaspar was quoted (by Business Insider India news site among others) that “Under unchanged policies, debt dynamics in the U.S. are very unfavorable.”
On the other side of the IMF’s ledger—its policies—at the Annual Meetings it is pushing the idea that because of the lack of infrastructure credit throughout the developing countries, the 17 major multinational development banks should all increase their lending relative to their capital by increasing their debt leverage—but do so only for lending to “ecologically sustainable” projects. The IMF is trying to amass pledges from the development banks to wave around at COP28 in Dubai over Nov. 30-Dec. 12, 2023, and the Asian Development Bank has already announced it is adopting the policy and will increase its lending by 40% to 2030, but only for projects to “save the planet.”
It may have been with an eye to this IMF scheme that the Russian government has denounced in advance, any effort to push an agreement at COP28 to “phase out fossil fuel production”; and so has Brazil’s Finance Minister Fernando Haddad.
