IMF Warns Wealthiest Nations about their Debt

It's a timebomb that continues to tick:

The International Monetary Fund warned the world's wealthiest nations Sunday to watch their surging levels of government debt, saying it could drag down the growth needed to ensure continued economic recovery.

The economic crisis is leaving "deep scars in fiscal balances, particularly in the advanced economies," John Lipsky, the IMF's No 2. official, told the China Development Forum in Beijing. He said that countries that have been going into debt to stimulate their economies should now prepare for belt-tightening steps next year.

"Policymakers should be making it clear to their citizens why a return to prudent policies is a necessary condition for sustained economic health," said Lipsky, who is the fund's deputy managing director, according to remarks prepared for the conference.

The IMF projects that gross general government debt in the G-7 advanced economies, except Germany and Canada, will rise from an average of about 75 percent of GDP at the end of 2007 to about 110 percent of GDP at end of 2014, Lipsky said.

This year, the average debt-to-GDP ratio in the wealthiest countries is projected to reach levels that prevailed in 1950 in the aftermath of World War II, Lipsky said. The ballooning of government debt also comes amid rising health and pension spending, he said.

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