Global: IMF Sounds Alarm Over Soaring Global Public Debt and Tightening Fiscal Space

Global public debt is surging to unprecedented levels, with fiscal pressures intensifying worldwide, according to Vítor Gaspar, Director of the International Monetary Fund’s Fiscal Affairs Department. Speaking at the launch of the IMF’s Spring Fiscal Monitor in Washington, D.C., Gaspar highlighted the urgent need for robust fiscal discipline and strategic reforms to safeguard economic stability.

The Spring Fiscal Monitor reveals a troubling trend: global public debt is set to approach 100% of GDP by the end of the decade—exceeding even the peak levels observed during the COVID-19 pandemic. The findings raise red flags for policymakers, particularly in light of rising interest rates, sluggish economic growth, and growing expenditure demands.

“High debt, low growth, rising interest costs, spending pressures, and heightened policy uncertainty are converging to shrink fiscal space,” Gaspar cautioned. “These dynamics are making policy trade-offs more difficult and the choices more painful.”

He stressed the need for country-specific strategies to manage fiscal risk and maintain macroeconomic stability. The report underscores stark differences in public finance trajectories across nations, requiring tailored responses grounded in local economic realities.

Gaspar outlined three key priorities for fiscal resilience:

1. Stability-Oriented Fiscal Policy: Fiscal policies must align with broader macroeconomic stability objectives, serving as a foundation for sustainable growth and regulatory compliance.

2. Debt Reduction and Buffer Creation: Governments must focus on reducing public debt and building fiscal buffers to strengthen their capacity to respond to economic shocks and rising spending needs.

3. Structural Reforms for Growth: Coordinated structural and fiscal policies are vital to boosting long-term potential growth, easing policy trade-offs, and enhancing regulatory risk management.

Drawing lessons from recent global crises—including the 2008 financial meltdown and the pandemic—Gaspar emphasized the countercyclical role of fiscal policy in times of economic distress. He noted that public finance must support central banks in maintaining financial stability and preventing deeper, prolonged crises.

“In severe cases, public finance itself may be at the heart of the crisis,” he warned. “Timely and well-managed debt restructuring may become necessary.”

Despite the sobering outlook, Gaspar ended on a forward-looking note, calling for coordinated international action and long-term policy planning. “In today’s climate of uncertainty, fiscal policy must serve as an anchor for confidence and regulatory stability,” he said.

“There is still time to build a more resilient and equitable global economy. Finance Ministers must lead with trust, fairness in taxation, prudent spending, and a clear long-term vision.”