The International Monetary Fund (IMF) announced on Tuesday that global public debt is projected to reach a staggering $100 trillion this year, cautioning that the fiscal outlook for many nations may be even “worse than expected.”
In its latest fiscal policy report, the IMF estimates that global public debt will account for 93% of global gross domestic product (GDP) in 2023 and could approach 100% by 2030, 10 percentage points higher than levels recorded in 2019, prior to the COVID-19 pandemic.
“Global public debt is very high,” stated Era Dabla-Norris, Deputy Director of the IMF’s Fiscal Affairs Department. “There are significant reasons to believe that the debt burden or the debt outlook could be worse than anticipated.” Dabla-Norris highlighted current spending pressures related to climate change, overly optimistic debt projections, and the risk of substantial unidentified debt as contributing factors.
In light of these challenges, she emphasized the urgent need for countries to improve their fiscal management. The report introduced a new “debt-at-risk” approach, which assesses potential risks to debt projections. In a worst-case scenario, the IMF estimates that global public debt could soar to 115% of GDP by 2026, nearly 20 percentage points higher than its baseline forecast.
The findings suggest that “global factors increasingly drive fluctuations in government borrowing costs across countries.” Elevated debt levels in key nations could heighten volatility in sovereign yields and debt risks for others, the report noted.
However, with moderating inflation and interest rate cuts in many economies, the IMF posits that this is an “opportune” moment for countries to rebuild their fiscal buffers. The organization indicated that nations are now better positioned to withstand the effects of fiscal tightening.
To bring global public debt back under control, the IMF estimates that a fiscal adjustment of between 3.0 and 4.5% of GDP will be required on average almost double the size of past adjustments. As global economies navigate these turbulent financial waters, the call for robust fiscal reforms has never been more pressing.
