US fiscal deficit too large, IMF’s Gopinath says

The US should reduce its fiscal deficit and manage its rising debt levels, International Monetary Fund’s (IMF’s) first deputy managing director Gita Gopinath told the Financial Times.

“The US fiscal deficits are too large and they need to be brought down,” Gopinath told FT, underscoring the ongoing uncertainty around the US trade policy, despite recent tariff adjustments.

Her remarks came after Moody’s downgraded the US credit rating from its last triple A status, citing concerns about federal debt.

US President Donald Trump has expressed plans to extend his 2017 tax cuts, triggering concerns among investors.

Moody’s forecast that the proposed bill would push the US deficit from 6.4% in 2023 to nearly 9% by 2035.

Gopinath pointed to the growing ratio of debt to GDP, which was at 98% in fiscal 2024, up from 73% a decade ago.

“It should be that we have fiscal policy in the US that is consistent with bringing debt to GDP down over time,” she told the business daily.

While she acknowledged that US-China tariff truce was “a positive development”, she also noted that “very elevated” trade policy was affecting Washington.

“It is going to take a little while before the effects of all these developments work through the data,” she told FT.