IMF: US Can't Grow Its Way Out of $1T Interest Bill

TL;DR: The IMF said Wednesday that the U.S. can't grow its way out of a debt load that cost $1.14 trillion in net interest in fiscal 2026, up 11% in a year, according to The Center Square. Treasury Secretary Bessent says 3% growth fixes it. The IMF forecasts 2.3%. For private deals, the gap shows up as financing cost.

That interest bill is larger than what the government spent on Medicare or on the military, per the Congressional Budget Office figures in the same report. If you hold a public-market portfolio and keep getting pitched private deals, this is the number sitting underneath every one of those pitches.

What did the IMF actually say?

IMF Managing Director Kristalina Georgieva said U.S. growth cannot deliver the needed fiscal adjustment quickly enough, according to The Center Square's report as republished by Eurasia Review.

The disagreement is with Bessent. On Sept. 8 he said the country has a spending problem, and that with restraint and 3% growth, "we grow our way out of this," per The Center Square. A week later he told the House Financial Services Committee that 3% is where the government starts bending the debt curve. I take him at his word on the target. The arithmetic is the problem.

Is 3% growth realistic?

It looks like a stretch. The IMF's October World Economic Outlook forecasts only 2.3% U.S. growth in 2026 and 2027, according to Eurasia Review. Benn Steil of the Council on Foreign Relations called consistent 3% growth "highly unlikely" given the past two decades, per The Center Square.

The bar is higher than 3%. Steil said the Committee for a Responsible Federal Budget now estimates 3.3% growth would be needed just to stabilize the debt-to-GDP ratio. The CBO projects 1.8% annual growth over the next decade, and at that pace debt held by the public reaches 108% of GDP by 2030, up from about 100% of GDP this year, per the same report.

Growth figure	Who says it	What it means
1.8% a year	CBO projection, per The Center Square	Debt held by the public reaches 108% of GDP by 2030
2.3% in 2026 and 2027	IMF forecast, per Eurasia Review	Below Bessent's target
3%	Treasury Secretary Bessent	Where he says the debt curve starts bending
3.3%	CRFB estimate, per The Center Square	Needed just to stabilize debt-to-GDP
5% to 6%	CBO Director Swagel, per Bloomberg	Needed at 4% to 5% interest rates

The last row comes from CBO Director Phillip Swagel. He projected last week that the U.S. would need at least 5% annual growth to stabilize federal debt at a 4% interest rate. At 5%, roughly the current level, it would need 6% growth adjusted for inflation, according to Bloomberg via Moneyweb. Economists Bloomberg surveyed see growth of a little over 2% this year. Those estimates come from different models, so I'd treat the spread as the honest range, not a single answer.

Why are interest rates the real pressure?

Borrowing costs turn a big debt into a big bill. Benchmark 10-year yields stood around 5.2% on Wednesday, near their highest level since 2002, CNBC reported. The same story says the fiscal 2026 deficit is expected to top 6% of GDP, against 5.8% in fiscal 2025, because final figures have not yet been released. Total U.S. public debt has passed $40 trillion, per Bloomberg.

A bigger interest bill adds to the deficit, which adds to the debt, which adds to the interest bill.

What does this mean for private-market investors?

The cost of money stays a live variable in every deal you look at. Sponsors who borrow to buy assets pay what the Treasury market sets as the floor, and real estate, private credit and leveraged buyouts all price off that floor.

Here is a plain illustration, not a forecast. Say a sponsor refinances a $100 million loan at a rate one point higher. That is $1 million more a year in interest, and the money comes out of distributions or out of your equity cushion. When I vet a deal, I ask what happens to debt service if rates hold for three more years, and what happens at the refinancing date. No answer, no deal.

Liquidity is the second place this shows up. Stress in rate-sensitive vehicles tends to arrive as gates and delays, which I covered in BDC redemption gates explained and in how interval funds limit your withdrawals. Capital is also harder to raise: see private equity's fourth straight annual fundraising decline.

Common mistakes

Treating a growth target as a forecast is the easy one. Bessent's 3% is an aspiration, and the IMF's 2.3% is the number to plan around.

Underwriting a deal at today's rate and ignoring the maturity date trips up plenty of careful buyers, because a loan that looks fine now can look very different when it comes due, and by then the sponsor's options have usually narrowed.

Don't read one agency's estimate as settled. The CRFB, the CBO and the IMF each model this differently, and the range is wide.

FAQ

Is it possible for the US to ever get out of debt? The sources I cite don't say it is impossible, only that growth alone is not enough. CBO Director Swagel says holding debt steady needs 5% to 6% growth at current rates, per Bloomberg via Moneyweb, against a little over 2% that surveyed economists expect.

What would it take to eliminate the US debt? None of the cited sources lay out a path to eliminating it. Bessent pairs 3% growth with spending restraint, while the IMF says growth can't deliver the adjustment quickly enough. Stabilizing the ratio comes first, and that alone needs 3.3% growth, per the CRFB.

How much does the US owe in interest? Net interest on the public debt totaled $1.14 trillion in fiscal 2026, up 11% from the year before, according to the CBO as cited by The Center Square. That exceeds Medicare or military spending.

Do higher yields make this worse? Yes. The 10-year yield stood around 5.2% on Wednesday, near its highest since 2002, CNBC reported. A bigger interest bill adds to the deficit, which adds to the debt.

What to do today

Sign up for the free AIN briefing. When the next CBO or IMF number lands, I'll tell you what it changes for private deals and where the downside is.

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