The International Monetary Fund (IMF) has raised a red flag in its latest report on fiscal opportunities, warning that global public debt is set to surpass 100,000 billion dollars by the end of this year, a troubling 10 percent increase from pre-pandemic levels in 2019.
The IMF expressed concern that this mounting debt hampers governments’ ability to respond to economic downturns and impedes investment in growth initiatives. Additionally, it heightens the risk of state crises whereby countries struggle to repay their debts.
The IMF highlighted three key factors contributing to a potentially worse fiscal outlook in many nations: consumption pressure, overly optimistic debt projections, and undisclosed debts. Moreover, countries are expected to increase spending on various fronts such as aging populations, healthcare, green energy transition, climate adaptation, defense, and energy security.
With the looming possibility that debt-to-GDP ratios could soar even higher in the next five years, the IMF cautioned that factors like weaker growth and stricter financial conditions could further exacerbate the situation.