The IMF warns that global public debt could reach 100% of GDP by 2029, urging governments to strengthen public finances, improve tax collection and manage rising borrowing costs.
The International Monetary Fund (IMF) has warned that global public debt is projected to reach 100 per cent of Gross Domestic Product (GDP) by 2029, urging governments to strengthen their public finances amid rising borrowing costs and growing spending pressures.
The warning was issued on Wednesday, October 14, 2026, during the presentation of the IMF’s October 2026 Fiscal Monitor at the ongoing IMF and World Bank Annual Meetings in Bangkok, Thailand.
According to the Fund, global public debt rose to 94 per cent of GDP in 2025, driven largely by major economies. Higher interest rates, persistent expenditure commitments and costly energy subsidies are further limiting governments’ ability to stabilise their finances.
Presenting the report, Rodrigo Valdés, Director of the IMF’s Fiscal Affairs Department, said the resilience of global economic activity had not translated into a significant improvement in fiscal outcomes.
He warned that the opportunity for governments to implement orderly fiscal adjustments was narrowing, stressing the need for early action before deteriorating market conditions forced more painful measures.
Valdés noted that although the IMF expected fiscal balances to improve, the projected gains were not guaranteed, as governments continued to face competing demands for social protection, defence, healthcare and other development priorities.
He explained that rising interest rates were gradually increasing debt-servicing costs as governments refinanced existing obligations at higher rates.
According to him, the effect would become more pronounced over time as previously issued debt matured and was replaced with more expensive borrowing, placing additional pressure on public budgets.
Valdés also highlighted the importance of the interest-growth differential, which measures the difference between the interest rate on public debt and the rate of economic growth.
He explained that when borrowing costs exceed economic growth, public debt tends to rise more rapidly relative to GDP, particularly when governments continue to run primary deficits, where expenditure exceeds revenue excluding interest payments.
The IMF official said the differential was becoming less favourable across advanced and emerging market economies, increasing the risk of further debt accumulation.
David Furceri, a division chief in the IMF’s Fiscal Affairs Department, said emerging and developing economies needed to strengthen domestic revenue mobilisation by broadening tax bases, eliminating inefficient exemptions, simplifying tax systems and improving tax administration.
He said governments could increase revenue by addressing weaknesses in tax policies and improving compliance without necessarily raising tax rates across the board.
Furceri cited research indicating that tax administration reforms in some countries had generated additional revenue equivalent to almost two per cent of GDP.
He also warned that complicated tax procedures could discourage investment and undermine the productivity of small and young businesses.
He recommended tax systems that minimise unnecessary economic distortions while improving the efficiency of revenue collection.
For countries with narrow tax bases, Furceri said stronger domestic revenue mobilisation was essential to meeting debt-servicing obligations and financing critical development programmes.
However, he cautioned that increasing revenue alone would not be sufficient. Governments must also improve spending efficiency, safeguard investments in education, healthcare and infrastructure, and ensure that social assistance reaches the people who need it most.
The IMF’s warning underscores the growing challenge facing governments as they seek to balance rising debt obligations with essential public services and long-term economic development.
Visit GMTNewsng for more news stories.
