IMF official: Top economies must cut debt

BEIJING, March 21 (UPI) -- An International Monetary Fund official says the world's top economies, including the United States, need to rein in public indebtedness.

Speaking at the China Development Forum in Beijing Sunday, the IMF's No. 2 official, Deputy Managing Director John Lipsky, had a grim prognosis for the world's wealthiest economies, which have a level of public indebtedness not seen since the end of World War II, The New York Times reported.

Lipsky said for the United States, "a higher public savings rate will be required to ensure long-term fiscal responsibility."

The Times reported Lipsky said the average ratio of debt to gross domestic product in advanced economies was expected to reach 1950 levels this year, even assuming stimulus programs are withdrawn over the next few years. From 75 percent at the end of 2007, the Times said, the ratio of debt to GDP is expected to rise to 110 percent by the end of 2014.

The report said the ratio is expected to be near or to exceed 100 percent for five of the Group of 7 countries, with the exceptions of Canada and Germany, by 2014.

Maintaining public debt at post-crisis levels could retard potential growth in advanced economies by as much as half a percentage point each year, compared with projections before the crisis, Lipsky said.

Lipsky said it makes sense for the world's largest economies to keep up stimulus spending through this year, but "fiscal consolidation should begin in 2011, if the recovery occurs at the projected pace," the Times reported.