The IMF stated on Tuesday that it expects the world’s public debt to hit a record $100 trillion this year, but it also cautioned that the fiscal outlook for many nations may be much “worse than expected.”
According to the International Monetary Fund’s most recent assessment on fiscal policy, the world’s public debt is expected to reach 93% of GDP this year and nearly 100% by 2030, which is 10% more than in 2019 when the Covid-19 pandemic struck.
Prior to the report’s release, Era Dabla-Norris, the deputy head of the IMF’s Fiscal Affairs Department, stated to reporters, “Global public debt is very high.”
“There are very good reasons to believe that the debt burden — or the debt outlook — could be worse than expected,” she said, pointing to current spending pressures to address issues like climate change, overly-optimistic debt projections, and the possibility of large amounts of unidentified debt.
“So the bottom line is that it’s time for countries to get their fiscal house in order,” she said.
A new “debt-at-risk” method for evaluating the risks associated with debt predictions was presented in the IMF study.
In a worst-case scenario, it predicted that global public debt may reach 115% of GDP by 2026, which is about 20% more than the Fund’s initial projection.
Since “global factors increasingly drive the fluctuations in government borrowing costs across countries,” the report’s conclusion that high debt levels in important nations may “increase the volatility of sovereign yields and debt risks” for other nations.
The IMF stated that with many economies experiencing moderate inflation and interest rate reductions, it was a “opportune” time for nations to strengthen their fiscal buffers and that they were “better placed” than in the past to withstand the effects of fiscal tightening.
According to the IMF, an average fiscal adjustment of 3.0 to 4.5 percent of GDP would be required to bring the world’s public debt under control, which is nearly twice the amount of previous adjustments.
