Raghuram Rajan Warns: US Public Debt a Growing Vulnerability

Former Reserve Bank of India Governor Raghuram Rajan has raised concerns about the mounting public debt in the United States, warning of the risks posed by fiscal complacency. Speaking at the Bancor Prize award ceremony in Rome, Rajan highlighted how high debt levels undermine a country’s ability to respond to crises and weaken global cooperation.

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A Global Debt Crisis Looms

The IMF projects global public debt to reach $100 trillion by 2024, or 93% of global GDP, driven largely by the US and China. While falling inflation and interest rates offer a temporary reprieve, Rajan emphasized that governments must act now to reduce fiscal vulnerabilities.

“We’ve had the global financial crisis and the pandemic,” Rajan stated, warning of more frequent emergencies in the future. “We can’t be satisfied with building up debt.”

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US Debt Trajectory: A Warning Sign

The United States’ debt continues to rise, with the IMF forecasting steady growth in the coming years. Rajan urged US policymakers to take the issue seriously, describing current debt levels as a “vulnerability.” With Donald Trump set to return to the White House, the next administration will need to manage this growing burden effectively.

Building Fiscal Resilience

To address these challenges, Rajan proposed reforms to multilateral institutions, greater emphasis on global trade in services and climate action, and stronger international collaboration. He stressed that fiscal sustainability is critical not only for individual nations but for global stability.

A Call to Action

Rajan’s warning is a timely reminder that unchecked debt accumulation has far-reaching consequences. For the US and its peers, reducing debt is essential to building resilience against future crises. Acting now will ensure governments are better prepared for an increasingly uncertain world.

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