“Rising spending on health care is the main risk to fiscal sustainability, with an impact on long-run debt ratios that, absent reforms, will dwarf that of the financial crisis,” it said.
In a report on the world’s financial health released Tuesday, the IMF warned that many advanced countries are living beyond their long-term fiscal means, especially in the wake of the 2008-2009 crisis.
Debt for an average of 29 developed countries was at 97 percent of the size of their economies, and 103 percent for the G20 group of advanced economies.
To get to a sustainable debt level of 60 percent of GDP by 2020 — the median for the same countries before the crisis — many have to begin cutting spending sharply, even as they confront greater social spending costs for aging populations.
Those with the highest debt levels — Japan, Ireland, the United States and Greece — would have to reduce their fiscal deficits by 10 percent of GDP over the next decade…
Twenty years from now, health costs will grow another three percentage points of GDP in all the countries, and five percent more in the United States.
All this increase of costs relative to governments’ financial resources, the IMF said, will amount to “three times the estimated impact of the financial crisis on advanced economy public debt.”
The entire Western world is institutionally committed to living beyond its means in perpetuity. The expiry date on “perpetuity” is looming.