The International Monetary Fund's latest fiscal monitor report has predicted that the global public debt will surpass $100 trillion this year.
The report stated that the debt margin will reach 93% of global GDP by 2030, exceeding its 99% peak during COVID-19 driven by intense spending pressures and sluggish economic growth. The figures are projected to reach 93% of global gross domestic product by the end of 2024 and approach 100% by 2030, IMF said in its fiscal monitor report released Tuesday.
The findings that came ahead of the IMF and World Bank annual meetings in Washington, suggest that the future global debt level may soar above expectations with the US's spending plans being a key contributing factor.
"Fiscal policy uncertainty has increased, and political red lines on taxation have become more entrenched," the IMF said in the report. "Spending pressures to address green transitions, population aging, security concerns, and long-standing development challenges are mounting."
The report noted that the debt crisis will affect six key economies such as the U.S., Brazil, France, Italy, South Africa, and the U.S. IMF, therefore asking the government to adopt debt-reduction strategies to mitigate the impact, Bloomberg reported.
However, the IMF is particularly concerned about that the global debt outlook being at risk due to governments' reluctance to cut spending. With pressing needs to fund cleaner energy, support aging populations, and bolster security, the IMF notes that the risks to the debt outlook are "heavily tilted to the upside."
The IMF, using its "debt-at-risk" concept, warned that the debt levels could soar even higher, to 115% of the GDP in just three years, in the event of unfavorable circumstances, significantly exceeding baseline predictions by 20 percentage points.
"This is because high debt levels today amplify the effects of weaker growth or tighter financial conditions and higher spreads on future debt levels," it said.
The amount of global debt in danger is 88% for developing countries and 134% for advanced nations. The report pointed out that despite the positive state of the economy, governments are not acting quickly enough to address fiscal vulnerabilities.
The report also showed that current adjustment plans are not enough to stabilize or reduce debt confidently. But well-designed fiscal adjustments can help reduce debt risks, improve public debt outlooks, and mitigate the adverse impact on society.
