WASHINGTON: The International Monetary Fund (IMF) has forecast that global public debt will surge to a record $100 trillion this year, cautioning that the fiscal outlook for many nations could be even more dire than anticipated.
In its recent fiscal policy report, the IMF predicts global public debt will reach 93 percent of global gross domestic product (GDP) in 2023, escalating to nearly 100 percent by 2030—a 10 percentage point increase from 2019, prior to the Covid-19 pandemic.
Era Dabla-Norris, the IMF’s Deputy Director of Fiscal Affairs, emphasized to reporters before the report’s release that “global public debt is alarmingly high.” She further warned that the debt burden, or the debt outlook, could be more severe than projected, citing current pressures to address climate change, overly optimistic debt forecasts, and potential hidden debt.
“It’s imperative for countries to address their fiscal stability,” Dabla-Norris concluded.
The IMF introduced a novel “debt-at-risk” framework to evaluate debt projection risks. In a worst-case scenario, global public debt could peak at 115 percent of GDP by 2026, nearly 20 percentage points above the baseline estimate.
The report also highlighted that global factors are increasingly influencing government borrowing costs across nations, implying that high debt levels in major economies could amplify sovereign yield volatility and debt risks for others.
With inflation easing and interest rate cuts in numerous economies, the IMF suggests this is an opportune moment for countries to bolster their fiscal reserves. They are now better equipped to withstand fiscal tightening compared to previous periods.
The IMF estimates that, on average, a fiscal adjustment of 3.0 to 4.5 percent of GDP is necessary to rein in global public debt—nearly double the magnitude of past adjustments.
