By Ikenna Egwuatu-Elem
The International Monetary Fund (IMF) has warned that global public debt has risen to almost 100 per cent of gross domestic product (GDP), exceeding post-World War II highs and set to climb further amid mounting fiscal pressures.
IMF Managing Director Kristalina Georgieva disclosed this at the conclusion of the G20 Finance Ministers and Central Bank Governors’ Meeting in the United States, where she said the Fund remained committed to working with member countries to address global imbalances.
Georgieva said the global growth outlook for 2026 had firmed at around 3 per cent since April, with the global economy absorbing the impact of the energy supply shock better than expected through the use of oil and gas reserves, new energy sources and demand management measures.
She said surging investment in artificial intelligence (AI), including power projects required to meet rising energy demand, was supporting growth, particularly in the United States and economies integrated into the AI value chain, such as Korea.
However, she warned that the global outlook remained exposed to significant risks and that economic fortunes were increasingly divergent across countries.
“First, the energy shock is not over. The Strait of Hormuz remains largely closed, strategic oil and gas reserves will need restocking, AI drives up energy demand, and in the northern hemisphere winter is coming.
“Second, public debt—at almost 100 percent of GDP worldwide—now exceeds its post-World War II highs and is set to climb further. Looking back, the debt trajectory resembles a staircase: big vertical steps when shocks occur, little or no reduction afterward.
“Third, the disinflation process has stalled in many countries. Mounting fiscal pressures are pushing core bond yields upward and the interplay between fiscal and monetary policy worries markets.
“Last, but not least, the future impact of AI on productivity and financial stability is dogged by unknowns,” Georgieva said.
She said discussions at the meeting showed strong convergence around the need to lift potential growth across economies, stressing that structural reforms and sound fiscal and monetary policies were essential to creating stronger and better-balanced global growth.
“Beyond domestic responsibilities of policymakers, the G20 reminds us that international cooperation has a crucial role to play, especially in helping countries manage debt challenges, limit spillovers, and address global imbalances,” Georgieva observed.
IMF Flags Rising Debt Costs For Developing Economies
On developing countries, Georgieva said the sovereign debt landscape for emerging and low-income economies had gradually improved in recent years, supported by domestic policy efforts and international cooperation.
She cautioned, however, that progress remained uneven and that persistent risks in the global economy, including spillovers from rising yields in advanced economies, required policy discipline and stronger financial buffers.
According to Georgieva, rising global interest rates were particularly concerning because higher yields in major advanced economies lift yield curves across much of the world.
“High refinancing needs and rising debt-service costs are constraining many developing economies, in particular low-income countries, limiting their capacity to finance critical spending on infrastructure, health, and education, which undermines growth, and in turn, debt sustainability.
“These challenges are compounded by a sharp decline in net external financing, including cuts in official development assistance, and a marked reduction in new inflows from non-Paris Club creditors.
“Helping countries create fiscal space to support growth-enhancing spending is even more pressing in the current conjuncture.”
IMF Calls For Coordinated Action
Georgieva said central banks should remain focused on price stability, while fiscal authorities should develop credible medium-term consolidation plans.
She added that structural policies should focus on reducing red tape and removing barriers to growth, arguing that stronger potential growth could help address fiscal pressures, while improved fiscal conditions could in turn strengthen growth prospects.
On sovereign debt, she said countries facing unsustainable debt required decisive action, supported by further improvements in restructuring processes.
“First, decisive action is needed in countries where debt is unsustainable, supported by further improvements in restructuring processes. Important progress has already been achieved, particularly under the G20 Common Framework,” she stated.
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