Public Debt: IMF Calls on the United States and France to Take Urgent Steps to Stabilize Their Finances

IMF reserves against the US strategy

At the annual meetings of the International Monetary Fund and the World Bank in Bangkok, Kristalina Georgieva warned against the US fiscal strategy, CNBC reported. According to the executive director of the institution, the US government is relying excessively on the acceleration of activity to curb its debt. Although economic expansion is useful, it cannot ensure the necessary corrections with the required speed, she insisted at a panel on Wednesday.

The US Treasury Secretary, Scott Bessent, argued last month that an increase in activity of more than 3% would allow the country to overcome the debt crisis and to influence the debt-to-GDP trajectory, CNBC recalls. The federal government highlights investments in artificial intelligence, industrial relocations and tax cuts to stimulate growth. However, the IMF expects a limited US expansion of 2.3 per cent in 2026 and 2027. According to its projections from the October World Economic Outlook, the United States' gross public debt is projected to rise to 142 per cent of GDP by 2031, while the federal debt has already crossed the 100 per cent threshold of GDP and exceeded $40,000 billion.

France's uncertain fiscal trajectory

The public finance situation in France is also a source of concern for the IMF leader, Le Figaro and BFM Business reported. On the margins of the Bangkok meetings, Kristalina Georgieva warned that it will take time to restore the full confidence of investors and the people, as Hexagon tries to place its liabilities on a downward slope.

The National Assembly is scheduled to begin on Tuesday the consideration of the finance bill for 2027, with the aim of reducing the public deficit to 5% of GDP next year, said the two French media. However, this trajectory remains very precarious due to the absence of a parliamentary majority and the political calendar marked by the presidential election. In this context, the debt burden is increasing: the yield on French 10-year-old government loans is now close to the 5% mark, with doubts about France's political and budgetary stability.

Widespread tension in bond markets

The deterioration of public accounts is not limited to these two countries, said Le Figaro, IMF leader. Kristalina Georgieva urged developed countries to urgently repair their budgetary foundations before deeper loopholes arose, optimizing public management, controlling spending and raising revenues. According to the Washington institution, too many states have not taken advantage of post-pandemic periods to rebuild their reserves, leaving global debt to exceed 100 per cent of GDP before the end of the decade.

This situation is fuelling strong tensions in the rate markets, the IMF analysed in its report on global financial stability cited by CNBC. On the sovereign compartment, the US borrowing cost on 10- and 30-year-old maturities has risen to unprecedented peaks since 2002, as has French 10-year interest rates flirting with 5%. The US 10-year reference rate was 5.2% on Wednesday. This surge is the result of both energy-related inflationary pressures, the monetary tightening of central banks and growing doubts about state discipline.

Competition from fundraising in artificial intelligence

The IMF report relayed by CNBC highlights another source of tension on public debt: competition from technology companies. The sector's giants are mobilizing huge volumes of capital to finance artificial intelligence, directly competing with national treasury emissions. Hyperscalers now account for 10% of global bond issues from good credit quality companies, compared to less than 1% in 2024.

The financial institution is also alarmed by circular financial arrangements between companies in the sector. Since 2023, fourteen listed transactions have drained approximately $300 billion in capital and $650 billion in debt to less robust AI firms, in return for $1,400 billion in commitments on future revenues, explained Jason Wu, Deputy Director of the IMF. If the commercial profitability of these technologies fails, these commitments may not materialize, weakening the entire system.

Increased risks to global financial stability

The vulnerability of sovereign markets is exacerbated by speculative positions, warns the IMF report. According to federal reserve data cited by the organization, the share of US Treasury bills held by hedge funds rose to about 9% in 2025, compared to 4% in 2022. Caio Ferreira, Deputy Head of Division at the IMF, stressed that the leverage effect and the accumulation of identical positions by several funds raise fears of a disorderly outcome in the event of market reversal.

Faced with these risks, the IMF recommends that sovereign issuers increase the average maturity of their borrowings in order to limit refinancing risks, and urges governments to adopt credible medium-term fiscal frameworks. According to Kristalina Georgieva, quoted by Le Figaro and BFM Business, rising reference rates also deprives emerging and low-income countries of security margins, increasing debt servicing in an environment already weakened by climate shocks and energy prices.