US treasury to borrow USD 3 trillion to support economy

The US Department of the Treasury made an announcement on May 4 and stated that the treasury expects to borrow the US $2.999 trillion in privately-held net marketable debt from April to June.

Created On: May 5, 2020 12:36 IST
US treasury to borrow money
US treasury to borrow money

The US Department of the Treasury has stated that it will be borrowing about US $3 trillion in the second quarter to support the economy amid COVID-19.

The department made an announcement on May 4 and stated that the treasury expects to borrow the US $2.999 trillion in privately-held net marketable debt from April to June. It has been assumed that the end of June's cash balance will be US $800 billion.

The department has also mentioned that a borrow of another US $677 billion in the third quarter can be expected.

Key Highlights:

•  The increase in borrowing came after the Commerce Department reported that the US real GDP has contracted at an annual rate of 4.8 percent amid COVID-19 in the First Quarter. It has been the biggest quarterly decline since the financial crisis in 2008.

•  Due to the ongoing crisis and legislation efforts to combat it, debts and deficits are expected to grow much higher to never before seen level in dollars and as a share of GDP.

•  US budget deficit will be more than US 3.8 trillion in 2020 along with the debt held by the public that will exceed the size of the economy by end of the fiscal year 2020.

•  The US national debt has seen a rise under the US $20 trillion to over US $24 trillion since President Donald Trump came to power in 2017.

Reasons for the increased borrowing:

The increase in the privately-held net borrowing is because of the increasing impact of the COVID-19 outbreak. The increase in borrowing can also be credited to the expenditures from new legislation to assist individuals and businesses.

There have also been changes to tax receipts that include the deferral of individual and business taxes from April-June and July.

As per the department, an increase in the assumed end-of-June treasury cash balance is also one of the reasons for the increase in borrowing.

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