IMF Warns of Rising Global Public Debt
The International Monetary Fund (IMF) has issued a stark warning regarding the ongoing rise in global public debt, which is projected to exceed $100 trillion by the end of 2024. This alarming figure represents 93% of the world's gross domestic product (GDP), indicating a significant financial burden on nations worldwide. The IMF's recent report on fiscal policy highlights that while the percentage of public debt has remained stable since 2023, its absolute value continues to increase, with expectations that it could reach 100% of GDP by 2030, a notable rise from pre-pandemic levels.
The IMF's assistant director of fiscal affairs, Ira Dabla Norris, emphasized during an online press conference that the financial conditions of many countries may be
worse than expected. She pointed out that historical trends suggest that debt projections are often overly optimistic, as governments may rely on favorable growth prospects or fail to implement necessary fiscal reforms fully. This could lead to a situation where even announced financial corrections may not effectively control or reduce public debt.
Economic Implications of Rising Debt
The report indicates that major economies, particularly the United States and China, are experiencing continuous increases in their public debt. To effectively reduce this debt, a fiscal adjustment of 3.8% of GDP annually would be required until the decade's end, compared to the currently planned 1%. However, significant cuts to public spending could have detrimental effects on economic growth, potentially exacerbating social disparities and increasing the debt-to-GDP ratio.
The IMF has repeatedly stressed the importance of restoring financial margins that have been diminished by successive crises since the COVID-19 pandemic. Additionally, there is a pressing need for countries to invest in combating global warming and adapting to its impacts, which further complicates fiscal management. The rise in interest rates over the past three years has also strained public finances, increasing borrowing costs for many nations.
Urgent Call for Fiscal Action
Despite the IMF's projection that debt levels may stabilize or decline in two-thirds of countries, the organization warns that public debt will remain above pre-pandemic levels. The IMF is urging nations to take immediate action to address these fiscal challenges, as delaying necessary interventions could result in higher costs in the long run. The need for decisive fiscal policies is more critical than ever to ensure sustainable economic growth and resilience against future crises.
