The International Monetary Fund has raised concerns over the resurgence of global public debt, projecting that it may surpass the historic highs recorded during the COVID-19 pandemic. In its latest fiscal assessment, the IMF revealed that mounting tariff pressures, particularly from major economies like the United States, combined with sluggish global economic growth, are likely to drive public debt past 99% of GDP by the end of this decade.
Following a brief decline after the pandemic peak in 2020, when global debt soared to 98.9% of GDP due to extensive fiscal stimulus, the trend is now reversing. The IMF’s forecasts show debt levels rising again—expected to reach 95.1% of GDP in 2025. If current policy directions remain unchanged, global public debt could climb to 99.6% by 2030, with some downside scenarios suggesting a spike to as high as 117%—a level not seen since World War II.
One of the primary drivers of this shift is the escalation in trade protectionism. Recent increases in import tariffs, especially from the U.S., have not only heightened global trade tensions but have also led to retaliatory measures from other economies. These actions are creating significant fiscal pressure, making it harder for governments to stabilize their budgets. The resulting uncertainty is dampening investor confidence and slowing down growth further, complicating efforts to reduce fiscal deficits.
Additionally, governments are facing increased spending demands in several key areas. Rising defense expenditures, aging populations, and the need for sustained investments in health, education, and climate initiatives are all stretching public finances. Coupled with higher interest payments due to increasing global interest rates, many countries are entering a fiscally precarious phase.
The IMF’s report notes that global fiscal deficits are projected to average 5.1% of GDP in 2025, up from 5.0% in 2024. This is a sharp contrast to the 3.7% deficit recorded in 2022. Even countries like the United States, which may see modest improvements in budget deficits due to strong growth and increased tariff revenue, are cautioned against fiscal complacency—especially if temporary tax cuts are extended.
To mitigate these risks, the IMF is calling for credible fiscal consolidation strategies. It urges countries to strengthen their debt frameworks, improve the efficiency of public spending, and build fiscal buffers that could absorb future shocks. According to the fund, the current trajectory of public finances could weaken long-term economic stability if not addressed with timely and effective policy measures.
The IMF's warning serves as a crucial reminder that the global economy remains vulnerable to policy missteps, particularly in areas related to trade and fiscal management. While tariffs can offer short-term revenue and protect domestic industries, they may also trigger broader economic consequences by dampening international trade, disrupting supply chains, and increasing consumer costs.
Equally important is the need for fiscal discipline. Governments must strike a delicate balance between supporting growth and maintaining fiscal sustainability. Investments in infrastructure, climate resilience, and social development are essential, but they must be paired with strategies that ensure debt levels remain manageable over time.
Ultimately, restoring global fiscal health will require coordinated international action, prudent policy choices, and a commitment to transparent and accountable governance. Without these efforts, the world risks entering a period of prolonged fiscal instability that could undermine recovery and progress in the years ahead.