In a landmark report released on Tuesday, the International Monetary Fund (IMF) warned that the world’s total public debt is set to exceed $100 trillion for the first time in history this year, marking a significant shift in global financial dynamics. This staggering figure highlights growing concerns about the sustainability of public debt in the face of slow economic growth, rising political pressures for increased spending, and uncertain fiscal policies. According to the IMF’s latest Fiscal Monitor report, this trend shows no sign of slowing down and could accelerate further, posing risks to the stability of both advanced and developing economies.
As political sentiment increasingly favors higher public spending to address critical issues such as aging populations, environmental transitions, and national security, borrowing needs have expanded rapidly, driving up debt levels. The IMF now predicts that global public debt will reach 93% of global Gross Domestic Product (GDP) by the end of 2024, and it is expected to approach 100% by the end of the decade. This would surpass the 99% peak seen during the COVID-19 pandemic, which had already stretched government resources to unprecedented levels.
Released just a week before the IMF and World Bank’s annual meetings in Washington, the Fiscal Monitor paints a complex picture of the global economy, where both developed and developing countries face mounting fiscal challenges. As the IMF raises alarms, the report underscores the need for stronger fiscal policies to contain debt growth and prepare for potential economic shocks in the years to come.
The IMF’s announcement of global debt crossing the $100 trillion mark comes as a stark reminder of the significant challenges that lie ahead for the global economy. This figure, which encapsulates the combined borrowing of all the world’s governments, reflects a sharp rise in debt since the onset of the COVID-19 pandemic, which saw governments implement large-scale fiscal measures to cushion the impact of the global health crisis.
In 2019, before the pandemic hit, global public debt was around 83% of GDP. However, as the pandemic took hold, countries around the world were forced to ramp up spending to support healthcare systems, provide economic stimulus, and protect jobs, leading to an explosion in borrowing. Despite some recovery in the global economy, debt levels have remained stubbornly high, with several factors—ranging from slower-than-expected growth to increasing political pressures for more government intervention—keeping the upward momentum.
IMF Deputy Fiscal Affairs Director Era Dabla-Norris noted, “The current debt trajectory is unsustainable for many countries. We see fiscal policy uncertainty increasing, and political red lines on taxation becoming more entrenched. At the same time, spending pressures are mounting to address key challenges like green transitions, population aging, security, and long-standing development goals.”
The IMF identifies several key drivers behind the rapid rise in global public debt. First, governments across the globe are grappling with increased spending demands. The green transition—requiring massive investments in renewable energy and climate resilience—is a prime example. At the same time, aging populations in advanced economies are putting pressure on pension systems and healthcare services, while geopolitical tensions and security concerns have also led to higher military expenditures in several regions.
Political dynamics are also playing a significant role. In the United States, for example, both major political parties have signaled a willingness to increase spending in ways that could balloon deficits even further. Republican presidential candidate Donald Trump has proposed tax cuts that could add $7.5 trillion to the U.S. debt over the next decade, while Democratic nominee Vice President Kamala Harris’s plans, though more moderate, would still increase debt by an estimated $3.5 trillion over the same period, according to projections from the Committee for a Responsible Federal Budget (CRFB).
Global debt could rise even faster than anticipated if economic growth remains weak and borrowing costs continue to climb. The IMF’s Fiscal Monitor includes a “severely adverse scenario” where these conditions persist, leading to a potential rise in global public debt to 115% of GDP within three years—20 percentage points higher than current projections.
The IMF has long advocated for fiscal consolidation—reducing deficits and stabilizing debt levels—to ensure long-term financial stability. However, the political climate in many countries has made this increasingly difficult. Calls for austerity measures are often met with strong resistance from the public and policymakers, particularly in areas where spending cuts could harm social programs, healthcare, or infrastructure development.
In the U.S., for instance, fiscal consolidation has taken a backseat as policymakers focus on addressing immediate economic concerns. The Congressional Budget Office (CBO) estimates that the U.S. fiscal deficit for 2024 will reach $1.8 trillion, equivalent to over 6.5% of GDP. This continued deficit spending is likely to exacerbate long-term debt challenges, particularly as interest rates rise and the cost of servicing debt increases.
Across the Atlantic, countries like the U.K., France, Italy, and Brazil are also grappling with rising debt. In many cases, fiscal consolidation efforts have been postponed in the face of political pressures and immediate spending needs. The IMF warns that delaying fiscal adjustments could lead to more significant consequences in the future, as high debt levels can trigger adverse market reactions and limit countries’ ability to respond to future crises.
Era Dabla-Norris emphasized that while cutting public investment or social spending can have a much larger negative impact on growth, governments need to focus on better-targeted fiscal reforms. “Cuts in public investment or social spending tend to have a much larger negative impact on growth than poorly targeted subsidies, such as fuel subsidies,” she said. Instead, governments can broaden their tax bases and improve tax collection efficiency, as well as implement more progressive tax systems that target capital gains and high-income earners more effectively.
The relationship between debt and economic growth is complex. While government borrowing can help stimulate economic activity in times of crisis, excessive debt can create long-term risks that undermine financial stability. As debt levels rise, so too does the cost of servicing that debt—particularly if interest rates increase. This can crowd out other critical areas of government spending, such as education, infrastructure, and healthcare, and lead to slower long-term growth.
The IMF has expressed concern that the current economic environment, characterized by solid growth and low unemployment, presents an opportune time for countries to pursue fiscal consolidation. However, its latest report argues that current efforts are insufficient. Global efforts to tighten fiscal policy average just 1% of GDP over the six-year period from 2023 to 2029, a level the IMF deems inadequate to stabilize debts with high certainty. To achieve this, the IMF estimates that a cumulative tightening of 3.8% would be required globally, with even more significant adjustments necessary in countries like the U.S. and China, where debt is projected to keep rising.
One major risk is that if countries fail to address their debt challenges now, they could face much more severe economic consequences down the road. Higher debt levels can make it more difficult for governments to respond to future shocks—whether they stem from financial crises, natural disasters, or geopolitical events. Moreover, high debt levels can limit the room for fiscal and monetary policy maneuvers, particularly if market sentiment shifts, causing interest rates to rise and increasing the risk of debt defaults in highly indebted countries.
To address these challenges, the IMF has recommended a range of policy solutions that could help stabilize debt levels and promote long-term financial stability.
- Broadening Tax Bases: Many countries have significant opportunities to improve their tax collection systems, close loopholes, and expand the range of taxable activities. By doing so, they can increase revenue without resorting to politically unpopular tax hikes.
- Making Tax Systems More Progressive: In countries with high levels of income inequality, there is room to implement more progressive tax systems that place a higher burden on wealthier individuals and corporations, particularly through more effective taxation of capital gains and income.
- Targeting Spending More Efficiently: Governments should aim to reduce poorly targeted subsidies, such as those for fuel, which often disproportionately benefit wealthier citizens. Instead, they should focus on investments in areas that promote long-term growth, such as education, infrastructure, and renewable energy.
- Strengthening Fiscal Frameworks: Countries need to adopt more credible and transparent fiscal frameworks that provide clear guidance on debt sustainability and allow for flexibility in responding to economic shocks. This can help build investor confidence and reduce the risk of market volatility.
As the global public debt surpasses the $100 trillion milestone, the world faces significant fiscal challenges that require urgent attention from policymakers. The IMF’s latest report underscores the need for stronger fiscal consolidation efforts and targeted reforms to stabilize debt levels and prepare for future economic shocks. While political constraints and rising spending pressures make this a difficult task, the consequences of inaction could be even more severe.
