Global public debt is set to top $100 trillion by the end of 2024, IMF says

The debt could increase more amid higher spending pressures from governments as well as the slowdown in the global economy

Global public debt will reach about 93 per cent of global GDP by the end of 2024 and will approach 100 per cent by 2030, IMF says. Bloomberg

The world’s total public debt is forecast to exceed $100 trillion this year for the first time and could increase more because of higher spending pressures from governments as well as the slowdown in the global economy, according to a new report from the International Monetary Fund.

Global public debt will reach about 93 per cent of global gross domestic product by the end of 2024 and will approach 100 per cent by 2030. This would be up 10 percentage points from 2019, before the coronavirus pandemic boosted government spending to support economic growth.

“Fiscal policy uncertainty has increased, and political red lines on taxation have become more entrenched,” the Washington-based lender said on Tuesday.

“Spending pressures to address green transitions, population ageing, security concerns, and long-standing development challenges are mounting.”

The report comes as the US heads to polls next month to elect a new president. Both the contesting candidates, Donald Trump and Kamala Harris, have promised new tax breaks and welfare policies that could increase spending in the world’s largest economy.

The Committee for a Responsible Federal Budget, which advocates reducing federal deficits, estimates Ms Harris' tax and spending plans would add $3.5 trillion to deficits over 10 years, while Mr Trump's would add $7.5 trillion, according to a Reuters report this month.

Debt-at-risk varies significantly across countries, the IMF said. For advanced economies as a group, three-year-ahead debt-at-risk has declined from pandemic peaks and is estimated at 134 per cent of GDP, whereas for emerging market and developing economies, it has increased to 88 per cent of GDP.

“Differences within and across country groups reflect an initial higher level of debt in advanced economies and large primary deficits in systemically important economies such as China and the US,” the lender said.

The debt out-turns could also be higher than projected due to unidentified debt – the change in debt not explained by interest-growth differentials, budgetary deficits, or exchange rate movements, according to the IMF.

Unidentified debt has historically been large, averaging 1.0 per cent to 1.5 per cent of GDP per year and increasing by up to 7 percentage points of GDP following financial system stress, it said.

The IMF also underlined the importance of rebuilding fiscal buffers to overcome unsustainable debt levels as central banks ease monetary policy and inflation moderates globally.

“Now is an opportune time to rebuild buffers … delaying is costly,” it said.

In countries where debt is projected to increase further – such as Brazil, France, Italy, South Africa, the UK, and the US, “delaying action will make the required (fiscal) adjustment even larger”, the IMF said.

Last month, the US Federal Reserve lowered interest rates by 50 basis points, initiating its first rate-cutting cycle in four years to protect the labour market as inflation slows.

In June, the European Central Bank also cut interest rates for the first time in five years, lowering them from a record high by 25 basis points to 3.75 per cent.

Meanwhile, the IMF report outlined elements needed for fiscal adjustments. These include strengthening fiscal governance and measures to address debt distress.

“Governments need deliberate fiscal plans, framed within credible medium-term fiscal frameworks and modern public financial management systems to anchor their adjustment paths and reduce fiscal policy uncertainty,” the report said.

Countries must also avoid unidentified debt. Assessing contingent liabilities, including those associated with state-owned enterprises, and monitoring them closely are critical, it said.

Strengthening expenditure controls and active cash management can also limit overspending, it added.

For countries facing debt distress or unsustainable debt, “timely and adequate restructuring is needed, along with fiscal adjustments to restore debt sustainability”, the IMF said.

Increasing tax revenue as well as controlling expenditures should also be prioritised.

Emerging markets and developing economies have greater potential to increase tax revenue by upgrading tax systems and broadening tax bases, while advanced economies should reprioritise expenditures and increase revenue through indirect taxes where taxation is low.

Governments should also provide the public with more transparent and timely information on debt, including the composition of creditors and instruments, and exposure to risks as they focus on controlling debt.