The International Monetary Fund (IMF) said that global public debt is on track to exceed 100% of GDP by the end of this decade, its highest level since 1948, in the aftermath of World War II.
Rising debt-servicing costs are adding pressure to government’s budgets, as well as increasing defense spending and aging populations, the Washington-based fund said in its latest Fiscal Monitor, published on Wednesday.
“Starting from too high deficits and debts, the persistence of spending above tax revenues will push debt to ever higher heights threatening sustainability and financial stability,” the IMF said.
There’s a risk that global debt could reach to 123% of GDP in 2029, according to the fund.
Finance ministers and central bankers are meeting in the US capital this week for the annual meetings of the IMF and World Bank, where officials are debating policy options to address slow growth, stubborn inflation and budgetary constraints.
The IMF report noted that the period of cheap borrowing between the global financial crisis and the Covid-19 pandemic hit has ended, with debt-servicing costs already weighing on budgets.
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“Interest rates have increased considerably in global markets, and their path forward is highly uncertain,” the report said.
The fund added that a “substantial portion” of public spending goes to pay wages, with an average of 25% of spending in advanced economies and 28% in emerging economies. “Spending on pensions, education and health care, and wage bills tend to be persistent,” according to the report.
