The International Monetary Fund (IMF) has issued a serious warning about the rapidly increasing levels of global public debt. According to the IMF’s latest Fiscal Monitor report released on Wednesday, global public debt is expected to climb above 100% of global GDP by 2029, marking the highest level since 1948. The report further cautions that debt levels will continue to rise unless countries act decisively to reduce deficits and strengthen fiscal buffers.
Vitor Gaspar, head of the IMF’s Fiscal Affairs Department, emphasized that under an “adverse, but plausible scenario,” global debt could reach as high as 123% of GDP by the end of this decade, just shy of the post–World War II record of 132%.
“From our viewpoint, the most concerning situation would be one in which there would be financial turmoil,” he said, referencing a separate IMF report that warned of a possible “disorderly” market correction.
Gaspar also cautioned that unchecked debt levels could trigger a fiscal-financial ‘doom loop,’ reminiscent of the European sovereign debt crisis of 2010. Such a loop could lead to a feedback cycle between fiscal instability and financial market turmoil, with devastating consequences for the global economy.
The International Monetary Fund (IMF) marginally raised its 2025 global growth forecast, citing a reduced short-term impact from tariffs. However, it also warned that a renewed U.S.-China trade war, which has escalated recently, could significantly slow global output.
Gaspar said, “With quite significant risks on the horizon, it’s important to be prepared, and preparation requires having fiscal buffers that allow authorities to respond to severe adverse shocks in the eventuality of a financial crisis.”
The IMF urged both advanced and developing economies to take immediate action to cut deficits, reduce public debt, and build up fiscal resilience. According to Gaspar, countries with stronger fiscal space are better positioned to protect employment and economic activity during financial shocks.
The Fiscal Monitor report revealed that rich economies — including the United States, Canada, China, France, Italy, Japan, and Britain — already have or are projected to surpass 100% debt-to-GDP ratios. While their risk levels remain moderate due to strong sovereign bond markets, emerging and low-income economies face greater vulnerability due to limited fiscal resources and higher borrowing costs.
The IMF noted that borrowing is now far costlier than during the years following the 2008–09 global financial crisis and the 2020 pandemic. High interest rates, combined with increased spending needs driven by geopolitical tensions, climate disasters, rapid technological disruption, and aging populations, have strained national budgets.
Gaspar acknowledged the political challenges, writing in the Fiscal Monitor foreword:
“While we do recognize that the fiscal equation is very hard to square politically, the time to prepare is now.”
He also stressed that targeted spending in education and infrastructure could yield strong long-term economic returns.
The IMF suggested that even reallocating one percentage point of GDP from current spending toward education or human capital investment could increase GDP by over 3% by 2050 in advanced economies and nearly double that growth in developing nations.
In the United States, public debt-to-GDP has already surpassed post-World War II peaks during the COVID-19 pandemic and is projected to exceed 140% by 2029. The IMF plans to urge U.S. authorities to stabilize debt by reducing fiscal deficits during its upcoming review of the U.S. economy.
Gaspar noted that cutting the deficit could rebalance the U.S. economy, lower global interest rates, and improve financing conditions for businesses worldwide.
Similarly, China’s public debt is expected to rise from 88.3% to 113% of GDP by 2029, a trend that has prompted the IMF to schedule a review of China’s economy next month.
The IMF’s latest warning underscores an urgent need for fiscal discipline and reform across both advanced and developing economies. With public debt on course to exceed 100% of global GDP within four years, policymakers must focus on reducing deficits, curbing unsustainable spending, and investing strategically in education and infrastructure to ensure long-term growth and stability. As Gaspar noted, “the time to prepare is now.”