The U.S. Treasury is pushing back hard against the International Monetary Fund after the fund warned that American debt is on an unsustainable path.
David Zervos, newly appointed counselor to the Treasury Secretary, told CNBC on Thursday that the IMF should examine its own track record before criticizing U.S. fiscal policy.
“When we see pieces on the IMF, it’s good to remember how messy their forecasts have been in the past,” Zervos said in emailed comments to CNBC.
Zervos, formerly chief market strategist at Jefferies, pointed to several high-profile forecasting failures by the fund going back decades.
“In 2008, [the IMF’s World Economic Outlook] had world growth at 3% and we had the first global contraction in post-world history a year later,” Zervos said.
He also cited the fund’s positive outlook on Southeast Asia before the 1997 financial collapse, its negative projections for Russia in 2022, and its optimistic stance on Argentina before the country fell into default again by 2020.
“So take it all with a grain of salt,” Zervos added.
The Treasury counselor was responding to IMF Managing Director Kristalina Georgieva, who warned this week that strong U.S. economic growth alone would not be enough to put mounting federal debt on a sustainable course.
Georgieva made her remarks during the IMF-World Bank annual meetings in Bangkok on Wednesday, pushing back against Treasury Secretary Scott Bessent’s earlier position.
Bessent had told CNBC in August that the U.S. could “grow our way out” of a rising debt-to-GDP ratio, a statement he made after government debt surpassed $40 trillion.
U.S. debt now exceeds $40 trillion, and 10-year Treasury yields remain above 5%, intensifying scrutiny over the country’s long-term fiscal outlook.
Many economists warn that mounting interest payments and a persistently high deficit have raised the risk of an unsustainable debt spiral, though they remain divided over whether a true fiscal crisis is likely.
The IMF has issued similar fiscal warnings to other major economies, with Georgieva telling CNBC on October 7 that her message to France was: “Get your house in order.”
Other financial institutions have also raised concerns, with the Institute of International Finance arguing in a September report that a “vicious cycle between elections and short-term quick fixes” to debt challenges was reducing governments’ ability to fund public services.
Global debt topped $365 trillion in the first half of the year, adding further urgency to calls for fiscal discipline from international economic bodies.
