IMF Insights: The Growing Threat of Global Public Debt

By: Apoorva Kuppa, The Quinnipiac University Economics Research Team  

 Credit: Photo by Harvepino on iStock 

On October 15, the IMF published "Global Public Debt Is Probably Worse Than it Looks," highlighting alarming trends in global fiscal health. Public debt is expected to reach over $100 trillion by the end of this year, equating to about 93% of global GDP, with a trajectory nearing 100% by 2030. Despite efforts to control debt in many nations, the IMF's Fiscal Monitor warns that actual outcomes might be far worse than current projections suggest, driven by persistent spending pressures, overly optimistic forecasts, and sizable unidentified debt. 

The report underscores how spending on healthcare, aging, climate adaptation, and defense continues to rise, pushing countries further into fiscal strain. Past trends show a tendency for debt projections to underestimate the real figures, with actual debt-to-GDP ratios often surpassing forecasts by 10 percentage points over five years. Adding to this, a significant portion of debt remains unaccounted for, stemming from contingent liabilities and risks linked to state-owned enterprises — issues that tend to spike during financial turbulence. 

To address this, the IMF proposes a stronger approach to fiscal adjustment. Current plans, averaging about 1% of GDP over six years, may not suffice to stabilize debt levels. Instead, the IMF recommends a cumulative tightening of around 3.8% of GDP within the same period to ensure a higher likelihood of debt control. Crucially, these adjustments must be carefully designed to avoid harming vulnerable households or long-term growth prospects. The call for stronger fiscal governance, better risk management, and enhanced debt transparency rounds out the recommendations, emphasizing that while the fiscal picture might seem stable for some, the risks are growing — and ignoring them could prove costly. 

For more information, you can read here.