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The US Treasury will borrow $3 trillion in the 2nd quarter as coronavirus stimulus costs mount

Steven Mnuchin
  • The Treasury Department plans to borrow $2.99 trillion in the April-June quarter to pay for the government's economic-aid measures.
  • Congress has so far allocated nearly $3 trillion to fiscal relief, and borrowing will likely increase if additional aid is passed.
  • The department also expects to borrow an additional $677 billion in the July-September quarter, bringing its estimated fiscal year 2020 debt issuance to $4.5 trillion.
  • The second-quarter sum is more than five times the amount needed to address the financial crisis and more than double the amount the Treasury borrowed through all of 2019.
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The Treasury Department plans to borrow $2.99 trillion in the second quarter to foot the bill for the government's widespread rescue response to the coronavirus.
The department announced Monday it also planned to take in an additional $677 billion in loans in the third quarter. Estimated debt issuance for the full fiscal year is expected to be nearly $4.5 trillion.
The second-quarter sum is more than five times the amount the department was loaned to pad against the 2008 financial crisis and more than double what it borrowed in all of 2019.
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The department's estimate came after Congress approved nearly $3 trillion in spending to protect the economy from a prolonged economic recession. The Treasury will need to issue massive amounts of debt to front the costs and keep aid flowing as the pandemic rages on.
Any additional government relief issued by Congress or the central bank would likely drive the Treasury to borrow more later in 2020.
"Borrowing needs are skyrocketing as Treasury needs cash to fund stimulus measures and to compensate for a plunge in revenues caused by massive job losses," Nancy Vanden Houten, an economist at Oxford Economics, wrote Monday.
Though the sum trounces that seen in recent years, current conditions favor the Treasury's actions. Interest rates sit near zero and are expected to remain at historic lows for the immediate future, lowering the cost of the department's borrowing.
The Treasury's latest estimate comes after budget watchdogs hiked estimates for 2020's federal deficit. The Committee for a Responsible Federal Budget projected on April 13 that the budget shortfall would nearly quadruple to $3.8 trillion from $984 billion this year. The only period with a similar deficit-to-GDP ratio was three years of the US's involvement in World War II, the committee said.
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* This article was originally published here Press Release Distribution

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