IMF Warns of Rising Global Public Debt Exceeding $100 Trillion
The International Monetary Fund (IMF) has issued a stark warning regarding the escalating global public debt, projecting it to surpass $100 trillion by the end of 2024, which equates to approximately 93% of global GDP. This marks a significant increase from 2019, when the debt-to-GDP ratio was 83%. The IMF's latest report indicates that while the percentage of public debt has stabilized at 93% since 2023, the absolute value continues to rise, with expectations that it could reach 100% by 2030.
Factors Contributing to Debt Increase
Ira Dabla-Norris, assistant director of the IMF’s financial affairs department, highlighted several factors contributing to this trend. Increased government spending, overly optimistic debt projections, and the presence of 'hidden debts'—often linked to public enterprises—are key drivers. The report also emphasizes the impact of rising interest rates over the past three years, which have significantly increased borrowing costs for many nations. Currently, around 40 countries are facing or nearing a debt crisis, exacerbated by escalating debt service obligations.
The Need for Fiscal Adjustments
To effectively manage and reduce public debt, the IMF suggests that countries need to implement fiscal adjustments averaging 3.8% of GDP annually until 2030, far exceeding the 1% adjustments currently planned. However, the IMF cautions that drastic reductions in public spending could have adverse effects on economic growth and social equity. The call for a balanced approach is crucial, as countries must also invest in critical areas such as healthcare, ecological transitions, and defense, which necessitate increased spending. The report underscores the importance of restoring financial margins to better prepare for future crises, while acknowledging the need for significant investments to address global challenges like climate change.
