|
Listen to article
|
On Tuesday, the International Monetary Fund (IMF) projected that global public debt is set to hit an unprecedented $100 trillion in 2024. This alarming figure comes with a stark warning: the fiscal outlook for numerous nations may be more dire than previously anticipated, raising concerns about financial stability worldwide.
The International Monetary Fund (IMF), in its recent fiscal policy report, has highlighted that global public debt is expected to surge to 93 percent of global GDP in 2024.
This trajectory suggests that by the year 2030, global public debt could approach a critical threshold of 100 percent of GDP, reflecting a significant increase of 10 percentage points since 2019, the year before the global upheaval caused by the Covid-19 pandemic.
The situation regarding global public debt is quite serious, as levels are very high, Era Dabla-Norris, deputy director of the IMF’s Fiscal Affairs Department, remarked to journalists before the report was made public. Such elevated debt poses significant challenges for governments around the world.
“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.
With the latest report, the IMF has rolled out a groundbreaking ‘debt-at-risk’ assessment method that focuses on the risks inherent in debt projections. This fresh perspective aims to shed light on the uncertainties that nations face in managing their public finances.
Read also: Petrol Price Hike Will Hurt Poor, Act Now —IMF To FG
The IMF’s estimates suggest that, should circumstances deteriorate significantly, global public debt could balloon to 115 percent of GDP by 2026.
This projection is nearly 20 percentage points higher than the Fund’s baseline forecast, indicating a potential fiscal crisis that could have widespread ramifications for economies worldwide.
The report found that “global factors increasingly drive the fluctuations in government borrowing costs across countries,” suggesting that elevated levels of debt in key countries could “increase the volatility of sovereign yields and debt risks” for others.
Moderating inflation and interest rate cuts in many economies meant now was an “opportune” time for countries to rebuild their fiscal buffers, the IMF said, adding that they were “better placed” than before to absorb the effect of fiscal tightening.
The size of the fiscal adjustment needed to bring global public debt back under control was between 3.0 and 4.5 percent of GDP, on average, the IMF said — almost twice the size of past adjustments.
