Global public debt in 2024 is expected to reach over $100 trillion (about 93% of global GDP), according to the IMF. By 2030, the IMF says global public debt is likely to reach 100%.
The pandemic led to extreme levels of borrowing and countries had to bump up public spending to stabilize their economies. Average fiscal deficit* rose from 3% of GDP before the pandemic to around 8% during the pandemic.
*Fiscal deficit occurs when a government’s expenditures exceed its revenues.
However, many of the world’s major economies have struggled to bring spending back under control, which is what the IMF is concerned about.
Worst-case scenario
To further illustrate this growing risk, in a “severely adverse scenario,” global debt could surge even more.
In a worst-case scenario, the IMF said global public debt could balloon to 115% of GDP in just three years – about 20% more than currently projected.
The reasons for this increase could include:
- Slower economic growth,
- Tougher borrowing conditions,
- Fiscal slippages, and
- Uncertainty about future policies.
“Unforgiving combination of low growth and high debt”
Kristalina Georgieva, Managing Director of the IMF, said at the 2024 IMF and World Bank Group Annual Meetings last week:
“Our forecasts point to an unforgiving combination of low growth and high debt – a difficult future.”
“The picture is made more troubling by high and rising public debt—way higher than before the pandemic, even after the brief but significant fall in debt-to-GDP as inflation lifted nominal GDP,” Georgieva added.
The IMF confirmed that the US and China are key contributors to the global rise in public debt. Both countries have ramped up borrowing, pushing overall debt levels higher. Given the major size and influence of these two major economies, they have a substantial impact on global debt trends.
Georgieva also pointed to low-income countries facing tough budget choices. Fiscal space (the ability of a government to borrow or spend without compromising financial stability) contracts disproportionately more in low-income countries.
“Just look at the frightening evolution of the interest-to-revenue ratio over time. We can immediately see how the tough spending choices have become tougher with higher debt payments. Schools or climate? Digital connectivity or roads and bridges? That is what it comes down to,” Georgieva said.
Below is the full video of Georgieva’s speech: