- Strong U.S. growth masks mounting fiscal and inflation vulnerabilities, IMF says
The United States economy continues to show resilience, but rising fiscal imbalances and persistent inflation risks could create broader instability for global markets, the International Monetary Fund has warned, highlighting growing vulnerabilities beneath the surface of strong headline growth.
In its latest Article IV assessment, the IMF said U.S. economic expansion reached 2% in 2025, supported by robust productivity gains and policy support, with growth expected to edge higher to 2.4% in 2026.
Yet the fund cautioned that this resilience masks deeper structural risks, particularly around fiscal sustainability, inflation dynamics and global spillovers issues that carry significant implications for emerging markets such as Ghana.
At the centre of the IMF’s concern is the trajectory of U.S. public finances. Despite a slight narrowing of the fiscal deficit to 5.9% of GDP in 2025, debt levels remain elevated at 123.9% of GDP, with projections suggesting further deterioration beyond 140% by 2031.
The Fund warned that this fiscal path could pose a systemic risk to global financial stability, given the central role of U.S. Treasury markets in global capital allocation.
For emerging and frontier markets, the implications are immediate. Higher U.S. borrowing needs and sustained deficits risk keeping global interest rates elevated, tightening external financing conditions and raising debt servicing costs for countries already navigating constrained fiscal space.
For Ghana, still recalibrating after debt restructuring, this environment could complicate efforts to return to international capital markets and sustain macroeconomic recovery. While inflation in the U.S. has stabilised, the IMF signalled that risks remain tilted to the upside.
Tariff-induced goods inflation, coupled with rising global energy prices linked to geopolitical tensions, could delay the return to target levels. The Fund expects inflation to ease toward 2% only by early 2027, underscoring a slower-than-anticipated disinflation path.
This has direct implications for monetary policy. With interest rates already close to neutral, the IMF cautioned that the U.S. Federal Reserve has limited room to cut rates in 2026 unless there is a significant deterioration in labour market conditions.
For global markets, this signals a prolonged period of higher-for-longer interest rates—a scenario that typically strengthens the US dollar and exerts pressure on emerging market currencies.
In Ghana’s case, such dynamics could influence exchange rate stability, imported inflation and foreign investor appetite for local assets. The IMF also raised concerns about shifts in U.S. trade policy, particularly the increase in tariffs and rising policy uncertainty.
Effective tariff rates are expected to settle between 7% and 8.5%, a level that could weigh on global trade flows and create negative spillovers for trading partners. Directors warned that heightened trade restrictions could reduce U.S. economic activity over time while amplifying external imbalances.
For export-dependent economies and commodity producers, including many African markets, weaker global trade growth could dampen demand, even as supply-side shocks continue to drive price volatility.
Beyond fiscal and trade concerns, the IMF highlighted vulnerabilities within the U.S. financial system, including elevated asset valuations and growing opacity in non-bank financial intermediation.
These risks, while domestic in origin, carry global consequences. A sudden shift in investor sentiment, particularly around US assets, could trigger capital flow reversals, currency volatility and tighter liquidity conditions across emerging markets. The Fund warned of the risk of a disorderly external rebalancing, particularly if foreign investors reassess their exposure to the US. assets amid rising debt levels and persistent deficits.
