IMF brands US debt threat to global economy

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IMF brands US debt threat to global economy

WASHINGTON - According to a report published this week by the International Monetary Fund, the United States is running up a record foreign debt which could threaten global financial stability as well as its own social security.

IMF analysts warned of a growing budget deficit and rising trade imbalance, giving the US a shaky fiscal foundation and posing "significant risks" for the rest of the world, reported the New York Times on Thursday.

Tax cuts introduced by the Bush administration and the country's habit of borrowing were questioned by the study. It suggested that these policies could inflate global interest rates, therefore slowing down global economic growth.

It also predicted that in a few years time, the US would have financial obligations to the rest of the world equal to around 40 per cent of its total economy. This would have implications for the value of the dollar and international exchange rates.

The White House dismissed the report, labelling it as alarmist and claiming that Bush had promised to reduce the budget shortfall by half during the next five years.

Other international economists praised the IMF for highlighting the issue.

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