IMF cautions about effects of global public debt on world economy
(MENAFN) Global public debt is set to outstrip the size of the world economy within five years, IMF Managing Director Kristalina Georgieva warned on Wednesday, describing the trajectory as a “sobering reality” for policymakers across both advanced and developing nations.
Speaking in a live address streamed on the IMF’s official YouTube channel, Georgieva said the surge in borrowing stems from widening fiscal deficits, pandemic-era legacies, and elevated interest costs.
“Global public debt is projected to exceed 100% of GDP by 2029,” she said. “This poses serious risks — inflating interest costs, pushing up rates, constraining spending, and weakening governments’ ability to respond to future shocks.”
The warning comes amid record U.S. federal debt, which reached $37 trillion in October — around 125% of GDP — making interest payments one of Washington’s largest expenditures, surpassing defense spending.
While the Trump administration has defended its borrowing as necessary for growth and social programs, critics warn the U.S. risks a fiscal crisis that could ripple through global markets. The IMF has previously cautioned that unchecked spending by major economies could drive up global borrowing costs and destabilize emerging markets.
Georgieva also highlighted broader vulnerabilities in the world economy, saying it is performing “worse than we need” and warning that “global resilience has not yet been fully tested.” She pointed to warning signs such as record gold prices — reaching $4,000 per ounce on Wednesday — and soaring U.S. stock valuations reminiscent of the dot-com bubble.
She further warned that the full impact of President Trump’s tariffs has yet to be felt, with potential knock-on effects for trade and investment.
In its July 2025 World Economic Outlook, the IMF forecast global growth of 3.0% in 2025 and 3.1% in 2026, slightly higher than earlier projections. However, the fund cautioned that persistent fiscal deficits, trade fragmentation, and inflated asset prices could derail recovery unless governments rein in spending and rebuild fiscal buffers.
Georgieva said the IMF will release an updated global outlook next week.
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