Amid the ongoing negotiations over raising the debt ceiling, Treasury Secretary Janet Yellen warned that “when a country’s debt load reaches a certain level it really makes it unsustainable.”
Yellen’s comments were made in response to a question about African countries restructuring their debt. Yellen recently met with the leaders of countries including Zambia, which has a debt to GDP ratio of 119% of GDP, according to the International Monetary Fund.
Yellen explained that Zambia is in the process of debt restructuring due to its debt burden.
“Debt is a huge issue, debt overhangs, huge issue for many African countries, and especially Zambia, that we visited,” she said during a discussion organized by the Center for Strategic & International Studies.
The Congressional Budget Office estimated that the U.S. national debt in fiscal year 2022 was equal to 98% of the nation’s GDP. The CBO projected that debt as a percentage of GDP will reach 107% of GDP in 2031 and “climb thereafter, rising to 185% of GDP in 2052.”
The U.S. has reached the statutory $31.4 debt limit. Despite record debt, U.S. currency has started off strong in 2023 when compared to other currencies. Treasury said it will take “extraordinary measures” while negotiations over raising the debt limit continue between congressional leaders and the White House.
“I think everybody realizes that when a country’s debt load reaches a certain level it really makes it unsustainable,” Yellen said. “It’s not a question of just creditors making concessions to help the borrowers.
“Debt restructuring not only serves the interests of the borrowers, it also serves the interests of the creditors, because if the country is stopped from growing, developing, making investments to put it on a firmer economic course, at the end of the day, more restructuring will be necessary and the country will be less able to make payments to creditors.”
In 2018, Yellen said the U.S. debt path was “unsustainable” at the Charles Schwab Impact conference, according to CNBC.
“If I had a magic wand, I would raise taxes and cut retirement spending,” Yellen, a former chair of the Federal Reserve, said in October 2018, when former President Trump was in office.
The national debt has risen significantly since that time, nearing a record $32 trillion.
The Treasury Department press office was not available for comment when asked if Yellen still thinks the U.S. debt path is unsustainable.