The International Monetary Fund (IMF) announced on Tuesday that the world’s total public debt is expected to exceed $100 trillion for the first time this year. The IMF predicts that the debt may grow faster than anticipated due to increasing political support for higher spending and the need for more borrowing amid slow economic growth.
According to the IMF’s latest Fiscal Monitor report, global public debt is projected to reach 93% of global gross domestic product (GDP) by the end of 2024 and could approach 100% by 2030. This level would surpass the previous peak of 99% during the COVID-19 pandemic and represent an increase of 10 percentage points from 2019.
The report was released just a week before the IMF and World Bank’s annual meetings in Washington. It suggests that future debt levels could be significantly higher than currently estimated, driven in part by intentions for increased spending in the U.S., the world’s largest economy.
The IMF highlighted rising fiscal policy uncertainty, with entrenched political positions on taxation complicating matters. There are mounting spending pressures related to green transitions, an aging population, security concerns, and longstanding development challenges.
The IMF’s concerns coincide with the upcoming U.S. presidential election, where both candidates have proposed new tax breaks and spending initiatives that could add trillions to federal deficits. Republican candidate Donald Trump’s tax cut plans could increase debt by around $7.5 trillion over the next decade, while Democratic nominee Kamala Harris’s proposals might add about $3.5 trillion, according to estimates from the Committee for a Responsible Federal Budget.
The report also points out that debt projections often underestimate actual outcomes, with realized debt-to-GDP ratios averaging 10% higher than initially forecasted five years prior. Factors like weak growth, tighter financing conditions, and increased fiscal and monetary uncertainty in major economies such as the U.S. and China could further escalate debt levels.
In a “severely adverse scenario” presented in the report, global public debt could reach 115% within three years—20 percentage points higher than current projections—if these adverse factors come into play.
While the IMF advocates for more fiscal consolidation, it warns that current efforts averaging 1% of GDP from 2023 to 2029 are inadequate to stabilize or reduce debt levels. To achieve meaningful debt stabilization, a cumulative tightening of 3.8% is necessary, especially in countries like the U.S. and China where GDP is not expected to stabilize.
The U.S. is anticipated to report a fiscal 2024 deficit of approximately $1.8 trillion, or over 6.5% of GDP, according to the Congressional Budget Office. Countries like Brazil, Britain, France, Italy, and South Africa, where debt levels are projected to rise, may face serious consequences.
Era Dabla-Norris, the IMF’s deputy fiscal affairs director, cautioned that delaying fiscal adjustments could lead to a more significant need for corrections later on, risking adverse market reactions and limiting governments’ abilities to respond to future shocks. She noted that cuts in public investment or social spending could negatively impact growth more than poorly targeted subsidies, like those for fuel.
The report also suggests that some countries could expand their tax bases and enhance the efficiency of tax collection, while others might consider making their tax systems more progressive by more effectively taxing capital gains and income.
