IMF projects U.S. debt-to-GDP to hit 143.4% by 2030, surpassing Italy and Greece

The International Monetary Fund (IMF) warned on the 27th (local time) that the U.S. national debt could surpass levels seen in Italy and Greece, once labeled as "fiscal problem children." Coincidentally, this warning came amid a federal government shutdown caused by U.S. political leaders' failure to agree on a budget. In the U.S., the Supplemental Nutrition Assistance Program (SNAP), which provides food assistance to 42 million low-income households, is set to halt starting the 1st of next month due to the shutdown. Experts assess that the debt issue, once considered a "theoretical crisis," has now become a "real fear" directly impacting American society.

On the 27th, the IMF projected in its recent outlook that the U.S. government debt-to-GDP ratio would reach 143.4% by 2030. This represents a nearly 20 percentage point surge from the current 125% level (based on the 2025 fiscal year). Over the same period, Italy's debt ratio is expected to remain around 137%, while Greece's is projected to decline from 146% to 130%. Italy and Greece, once dubbed Europe's fiscal problem children, faced default crises during the 2010 Financial Services Commission crisis. The U.S. debt-to-GDP ratio surpassing these countries would mark the first time since 1946, following the issuance of massive war bonds to fund post-World War II costs.

The U.S. national debt has already exceeded $38 trillion (approximately 53,000 trillion Korean won) as of this month. The fiscal deficit for the 2025 fiscal year alone amounts to $1.8 trillion (approximately 2,500 trillion Korean won). The IMF expects the U.S. to record annual fiscal deficits exceeding 7% of GDP until 2030 -- the highest among advanced economies.

The issue extends beyond sheer debt size. As debt grows, interest costs have exploded. According to the U.S. Treasury, the average interest rate on federal government debt surged from 1.556% in January 2022 to 3.36% in September this year -- more than doubling. Last month, the U.S. government's annual interest expenditure reached $1.216 trillion (approximately 1,700 trillion Korean won), accounting for 17% of total federal spending. This already exceeds the defense budget ($850 billion).

A greater fear is that the debt problem shows no signs of resolution even after 2030. The Committee for a Responsible Federal Budget (CRFB), analyzing the Congressional Budget Office's (CBO) long-term projections, estimates U.S. national debt will reach 156% of GDP by 2055 -- a 13 percentage point deterioration from 143% in 2030. Notably, a "debt spiral," where debt interest rates surpass economic growth, could begin as early as 2045. This implies a vicious cycle where debt begets more debt.

Experts criticize both the ruling Republican and Democratic parties for irresponsibly responding to rising debt. President Donald Trump approved massive spending through the "One Big Beautiful Bill," passed by Congress this summer. The bill extended the Republican tax cuts introduced in 2017. The CBO analyzed that this legislation would add a $3.4 trillion (approximately 4,700 trillion Korean won) deficit over the next decade. Increased defense spending, including Immigration and Customs Enforcement (ICE) funding for large-scale deportation operations and a $1 trillion "Golden Dome" defense shield, also contributed to the debt surge.

Joe Gagnon, a researcher at the Peterson Institute for International Economics, highlighted the political stalemate: "Democrats do not want spending cuts, and Republicans do not want tax increases." The ongoing shutdown is a catastrophic outcome of this deadlock. Ray Dalio, a global investor, criticized the Inflation Reduction Act (IRA) and CHIPS and Science Act led by former President Joe Biden as "irresponsible and excessive measures that went beyond necessary levels."

Leading economists have issued unified warnings. Kenneth Rogoff, a Harvard professor who warned of the 2008 financial crisis, shifted his stance: "I have never warned of a U.S. fiscal crisis before, but now I do." He predicts the U.S. could face a debt crisis within the next 4-5 years. While the U.S. enjoys superior borrowing capacity as the issuer of the global reserve currency, its contrasting path with Italy -- whose credit rating has improved through fiscal consolidation -- is symbolic. James Knightley, ING's chief international economist, noted, "U.S. politicians and investors have historically dismissed Europe, but such metrics change the conversation."

The debt crisis directly impacts dollar hegemony. President Donald Trump has publicly pressured the Federal Reserve to cut interest rates. Experts predict that as the U.S. imposes stricter financial sanctions on Iran, Russia, and others, countries like China may further reduce their dollar dependence.

Ray Dalio, founder of Bridgewater Associates, the world's largest hedge fund, likened the current situation to an "economic heart attack," warning the U.S. is nearing the end of a massive "debt cycle." He analyzed that the dollar could follow the decline of the Dutch guilder and British pound during the fall of empires. "While the U.S. is unlikely to default due to its ability to print dollars, it will repay debts with a devalued currency," he said, foreshadowing a loss of purchasing power. The Peter G. Peterson Foundation warned, "The three downgrades of the U.S. credit rating should serve as a wake-up call to leaders. If the path is not changed, the reserve currency status could be at risk."

US Debt-to-GDP to Surpass Italy, Greece by 2030, IMF Warns