According to the US "Business Insider" website reported on the 11th, the International Monetary Fund (IMF) warned that the US debt situation looks increasingly unsustainable, with corporate defaults soaring as interest rates remain high.
At a news conference on the 10th, IMF research director Joseph Gurinchas said that the U.S. fiscal situation was "the most worrying" among countries in the world. Gaspar, the IMF's fiscal affairs director, also said that the US deficit was high and that "the continuation of current policies is bound to lead to an unsustainable fiscal path". Total federal debt topped $33 trillion this year for the first time in history, equivalent to about 121 percent of U.S. GDP in 2022, and that figure is expected to surge in the coming years, with the additional risk that the United States could default on its debt within 20 years.
In the context of rising interest rates, high deficits pose a threat to the economy. According to Goldman Sachs strategists, by 2025, high deficits could send U.S. borrowing costs to new highs. Rising interest rates are also bound to cause some distress for borrowers, with more than $2 trillion of corporate debt coming due in 2024 in the United States alone. The IMF warned that borrowers may already be in financial instability by making debt more expensive as the Fed tightens monetary policy, and that higher interest rates could amplify those vulnerabilities, leading to a surge in defaults.
According to Fitch Ratings' estimates, the default rate on U.S. high-yield bonds is expected to reach 4.5% to 5% this year, more than six times the 0.7% default rate for all high-yield issuers in 2021. Charles Schwab has also warned that higher borrowing costs have financially crushed weaker companies and that a peak in defaults and bankruptcies in the U.S. could come as early as around the first quarter of 2024.