Fitch warns US of new debt limit

Credit rating agency Fitch said the US debt limit agreement did not address significant fiscal challenges. International credit rating agency Fitch Ratings reported that the debt limit law agreed on in the US did not address significant fiscal challenges. Fitch made a statement regarding its special report published on the US debt limit agreement. The statement stated that despite the modest spending cuts in the Fiscal Responsibility Act passed by Congress, known as the “debt limit agreement,” the US fiscal deficit is expected to continue to widen. According to Fitch’s latest forecast, the US general government debt to gross domestic product (GDP) ratio is expected to exceed 118% in 2025, up about 6 percentage points from 2022. The statement pointed out that the passage of the Fiscal Responsibility Act helped secure an agreement to suspend the debt limit until January 2025, and said, “However, the spending measures were largely limited to discretionary spending, which limited their overall impact.” was included in the statement. It was reported that this year’s general government deficit is estimated to increase by 2.6 points compared to 2022, reaching 6.3 percent of GDP, and that this ratio is expected to rise to 6.6 percent in 2024 and 6.9 percent in 2025. The statement emphasized that high interest rates feed interest expenditures, and noted that the ratio of general government interest to revenue, which was 7 percent last year, is expected to rise to 10 percent in 2025. It was underlined in the statement that there are very few signs of an agreement in the near term to further address the risks to public finances, and it is also unclear whether some existing tax cuts and spending limits will be extended beyond their planned end dates. The statement noted that the reluctance to increase taxes or cut spending makes it difficult to stabilize the general government debt ratio.