Washington: The International Monetary Fund (IMF) has raised a stark warning over the soaring levels of global public debt, cautioning that without decisive action, nations could face unprecedented financial vulnerability. According to the IMF, public debt worldwide is projected to exceed 100% of global GDP by 2029, a level not seen since the post-World War II period. In a more adverse scenario, the debt-to-GDP ratio could climb to 123%, approaching the historical peak of 132% recorded in the aftermath of the war. The fund highlighted that such a trajectory could spark financial instability similar to the European debt crisis of 2010.
The IMF attributes the surge in debt to persistent fiscal deficits averaging around 5% of GDP. These deficits are largely driven by pandemic-related expenditures, rising social spending, and higher interest costs on existing debts. Advanced economies, including the United States and China, already have debt-to-GDP ratios exceeding 100%, with projections suggesting continued growth. The U.S., for instance, could see its ratio surpass 140%, while China’s debt may reach 113% by the end of the decade. This mounting debt poses significant risks to economic stability, constraining governments’ ability to respond to future crises.
To counter these challenges, the IMF urged countries to implement robust fiscal reforms aimed at reducing deficits and strengthening economic resilience. Central to this strategy is investing in human capital, particularly education and infrastructure, which can stimulate long-term growth and mitigate the negative effects of high debt. The IMF emphasized that building fiscal buffers reserves that can be deployed in times of crisis remains critical to safeguarding national economies from external shocks and financial turbulence.
The IMF also highlighted the role of international cooperation in managing debt. Despite ongoing trade tensions, major economies like the U.S. and China remain engaged in global debt relief efforts through platforms such as the Global Sovereign Debt Roundtable. These initiatives aim to restructure debts in developing countries, though challenges remain, especially regarding opaque non-bonded loans. Countries like Ghana, Sri Lanka, Zambia, and Suriname face difficulties improving creditworthiness due to such complex liabilities.
Emerging economies continue to experience high debt servicing costs and limited access to international capital markets, even as some show modest improvements in debt-to-GDP ratios. The IMF stressed the importance of transparent lending practices and sustainable fiscal policies for these nations, warning that without careful management, rising global debt could exacerbate economic vulnerabilities and limit policy flexibility.
As global debt reaches historic highs, the IMF’s warning underscores the urgent need for coordinated action. Countries are urged to build fiscal buffers, pursue structural reforms, and invest strategically in human capital to protect economic stability and sustain long-term growth in an interconnected global economy.