IMF: U.S. Government Debt Set to Surpass Italy’s for the First Time This Century
The burden of U.S. government debt is on track to exceed that of Italy and Greece for the first time this century, according to the latest International Monetary Fund (IMF) forecasts — a signal highlighting the growing fragility of America’s public finances.
The IMF projects that total U.S. government debt will rise by more than 20 percentage points from its current level to reach 143.4% of GDP by the end of the decade, surpassing the record highs seen after the COVID-19 pandemic.
The Fund also estimates that the U.S. budget deficit will remain above 7% of GDP each year through 2030, the highest among advanced economies covered in its reports this year and for the rest of the decade.
Italy and Greece — long viewed as examples of weak fiscal management and at the center of the eurozone’s 2010-2012 sovereign debt crisis — are both expected to see their debt burdens decline by the end of the decade thanks to tighter fiscal control.
By contrast, the IMF expects the U.S. debt-to-GDP ratio to keep rising through 2030, with the Congressional Budget Office (CBO) forecasting that this trend will continue for decades.
“It’s a symbolic moment,” said Mahmood Pradhan, Head of Global Macro Economics at Amundi Investment Institute, in remarks to the Financial Times. “CBO projections show U.S. debt continuing to rise — a reflection of persistent structural deficits. However, Italy’s growth prospects are much weaker than those of the U.S., so this doesn’t mean Italy is out of the woods.”
As the issuer of the world’s reserve currency, the United States enjoys a much greater borrowing capacity than its European peers.
However, James Knightley, U.S. economist at ING Bank, noted that “many American politicians and investors often look down on Europe’s slow-growing economies, but when figures like these emerge, the narrative starts to change.”
The U.S. federal budget deficit has widened sharply under President Joe Biden’s administration, despite unemployment remaining near record lows. The IMF’s outlook suggests that the Trump administration has made limited progress in addressing this imbalance.
Joe LaVorgna, economic adviser to Treasury Secretary Scott Bessent, told the Financial Times that the administration has “made progress in reducing spending and boosting revenues through import tariffs.” He added: “What many don’t realize is that most of the improvement in this year’s deficit came after April.”
According to the IMF, total U.S. government debt has remained below that of Italy and Greece since the early 2000s. This measure — which includes both central and local governments — provides a broad picture of national indebtedness.
An alternative metric, net government debt, which deducts financial assets from total liabilities, shows that the U.S. debt load will remain roughly 10 percentage points lower than Italy’s by the end of the decade.
Joe Gagnon of the Peterson Institute for International Economics said that this measure “offers a more accurate picture of the U.S. debt burden because it better reflects the amount investors must actually hold,” adding that “net debt is also rising.”
Meanwhile, the IMF expects Italy’s net debt to start declining from 2028 onward, while it has not yet issued comparable projections for Greece.
Italy has long struggled to reduce its debt due to weak GDP growth — expected at 0.5% this year and 0.8% in 2026, according to IMF forecasts.
Even so, investors have praised Prime Minister Giorgia Meloni’s government for its fiscal discipline. Italy is expected to post a primary surplus of 0.9% of GDP this year, exceeding earlier estimates of 0.5%.
Rome also anticipates reducing its budget deficit to around 3% of GDP this year — down from 8.1% in 2022, the year Meloni took office — allowing Italy to exit the EU’s excessive-deficit procedure a year ahead of schedule.
“There’s a continued, cautious approach to fiscal policy,” said Filippo Taddei, Chief European Economist at Goldman Sachs.
Credit rating agency DBRS Morningstar this month upgraded Italy’s sovereign rating from “BBB (high)” to “A (low)”, citing improved investor confidence in the country’s fiscal outlook. Analysts attribute this progress to Rome’s effective use of over €200 billion in EU recovery funds and reforms boosting investment and employment.
Carlo Capuano, Vice President of Sovereign Ratings at Scope Ratings, said Italy has also benefited from “a stronger labor market and higher tax revenues, partly driven by the spread of digital payments.”
