The International Monetary Fund (IMF) has warned that global public debt has climbed to almost 100 per cent of gross domestic product (GDP) and is projected to rise further, exceeding levels recorded after World War II.
IMF Managing Director Kristalina Georgieva issued the warning after the G20 Finance Ministers and Central Bank Governors’ Meeting in the United States of America.
Georgieva said the global growth outlook for 2026 had improved since April and remained around three per cent, with the world economy proving more resilient to the energy supply shock than initially expected.
She attributed the resilience partly to the use of oil and gas reserves, new energy sources and demand management measures.
According to her, increased investment in Artificial Intelligence (AI), including spending on power projects to meet rising energy demand, is also supporting growth, particularly in the United States and economies integrated into the AI value chain, such as Korea.
However, Georgieva warned that the headline growth figures masked significant differences in economic performance and that major risks remained.
“But behind the averages, there is significant divergence in economic fortunes and risks to the outlook remain high.
“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 G20 discussions showed broad agreement on the need to raise potential growth globally, stressing that structural reforms, combined with sound fiscal and monetary policies, would be necessary to achieve stronger and more balanced 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.
Georgieva urged central banks to remain focused on price stability and called on fiscal authorities to establish credible medium-term consolidation plans.
She said structural reforms should focus on reducing red tape and other barriers to growth, arguing that stronger potential growth would ease fiscal pressures while healthier public finances would improve growth prospects.
On developing economies, Georgieva said the sovereign debt situation in emerging and low-income countries had gradually improved in recent years through domestic policy measures and international cooperation.
She cautioned, however, that progress remained uneven amid persistent risks, including spillovers from rising yields in advanced economies.
Georgieva expressed particular concern over higher global interest rates, saying rising yields in major advanced economies were pushing up borrowing costs 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.”
Georgieva said addressing the global debt burden would require collective action, including decisive measures in countries where debt levels are unsustainable and further improvements to debt restructuring mechanisms.
“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.
