In a statement made by Fitch, it was stated that the adoption of the temporary budget bill in the US prevented the partial closure of the government, but did not signal an improvement in the formulation of budget policies.
The statement noted that the government's budget deficit may have exceeded 9 percent of gross domestic product (GDP) last year, showing the inadequacy of temporary policies to address fiscal deterioration.
Recalling that the latest interim budget comes after last-minute agreements to suspend the debt limit in June 2023 and last year's interim budgets adopted in September and November to avoid partial government shutdowns, the statement said this shows the capacity to reach a bipartisan agreement on financing, but also reveals how the government's division makes it difficult to reach consensus on fiscal issues.
"Developments are consistent with our view that these political dynamics will continue at least until the elections in November," the statement said.
No major fiscal consolidation measures are expected to be adopted before then, the statement said, adding that possible proposals such as additional pallets of support for Ukraine or Taiwan or border security could further increase spending.
"Given the high political polarization, it is not clear that the policy of escalation will ease after the elections," the statement said.The results of these and whether the government will remain divided will also be important in terms of new legislation and setting the debt limit in January 2025, the statement said, adding that the continuous deterioration in governance over the last 20 years, including fiscal issues, combined with the fiscal deterioration and high public debt expected in the next 3 years, was the driving force behind the downgrade of the US rating to "AA+" in August last year.In the statement, it was noted that fiscal difficulties were exacerbated by high interest rates, and that in the last quarter of last year, net interest payments on public debt increased by 49 percent compared to the previous year.