The International Monetary Fund (IMF) has projected that global public debt will rise above 100 per cent of Gross Domestic Product (GDP) by 2029, reaching its highest level since 1948.
The projection was made by Vitor Gaspar, Director of the IMF’s Fiscal Affairs Department, during the presentation of the Fund’s Fiscal Monitor on Wednesday in Washington, D.C.
Gaspar warned that global debt risks are widespread and could accelerate if policymakers fail to act decisively.
“In the Fiscal Monitor, we project global public debt to go above 100 per cent of GDP by 2029. Public debt risks are widespread and tilted towards debt accumulating even faster. Policymakers must act now to keep debt under control and contain debt risks,” he said.
He explained that while the period between the global financial crisis and the COVID-19 pandemic was characterized by favorable conditions for sustaining debt, the current situation has changed dramatically.
“Rising debt was previously offset by falling interest rates, leading to stable debt servicing costs. However, interest rates have now increased considerably, and their future path remains uncertain,” Gaspar said.
He cautioned that the combination of high debt and rising interest rates could fuel financial instability, describing fiscal-financial feedback loops as a major concern.
Gaspar emphasized that governments must now use fiscal policy to restore debt sustainability and build buffers against future economic shocks.
“Fiscal policy should ensure debt sustainability and create buffers against future adverse shocks and heightened uncertainty. The solutions lie in improving growth prospects and strengthening trust in government through better governance and stronger institutions,” he added.
The IMF’s Fiscal Monitor underscores the importance of enhancing the efficiency and composition of public spending to drive long-term growth without increasing total expenditure.
It recommends redirecting spending towards infrastructure, education, health, and research and development, noting that improving efficiency and institutional capacity could further amplify economic gains.
The report also introduces new global datasets on public spending efficiency and rigidity, offering insights to help governments optimize fiscal management in a period of tightening financial conditions.
