Today's Edition
A.SREENIVASA REDDY (ABU DHABI)
Global public debt is projected to rise by 2.8% in 2025—more than double the increase recorded in 2024—pushing debt levels above 95% of global GDP, according to the International Monetary Fund (IMF)’s Fiscal Monitor, released on Wednesday.
“This upward trend is likely to continue, with public debt nearing 100% of GDP by the end of the decade, surpassing pandemic levels,” the report noted. These projections are based on the IMF’s World Economic Outlook reference scenario and factor in tariff announcements made between February 1 and April 4, 2025.
“Amid substantial policy uncertainty and a shifting economic landscape, debt levels could rise even further,” the paper warned.
The IMF report, authored by Era Dabla-Norris, Vitor Gaspar, and Marcos Poplawski-Ribeiro, comes against a backdrop of rising geopolitical tensions, trade disruptions, and slowing growth.
“Major policy shifts underway have heightened global uncertainty,” the authors stated. They pointed to recent US tariff measures and global countermeasures as key drivers of financial volatility and reduced growth prospects.
The IMF outlined a worrying scenario: in the event of a severely adverse shock, global public debt could reach 117% of GDP by 2027—the highest since World War II and nearly 20 percentage points above current baseline forecasts.
“Debt risks were already elevated,” the Fund said. The report emphasised that if economic output and revenue collections fall more sharply than anticipated—due to escalating trade frictions and geoeconomic fragmentation—debt burdens could escalate rapidly.
Moreover, the IMF highlighted the consequences of rising interest rates and tighter financial conditions, particularly in emerging and developing economies. “Tighter and more volatile financial conditions in the US may have ripple effects on emerging markets and developing economies, leading to higher financing costs,” it said.
Adding to the strain are demands for increased defence spending, fiscal support for those affected by trade shocks, and declining commodity prices. The Fiscal Monitor estimated that a significant rise in geoeconomic uncertainty alone could increase public debt by approximately 4.5% of GDP in the medium term.
The report called on governments to confront these fiscal risks through sound and credible policy action. “In an uncertain and rapidly changing world, countries will need to first and foremost put their own fiscal house in order,” the IMF said.
It urged nations to balance debt reduction with continued investment in social and infrastructure programmes, while adopting prudent medium-term fiscal frameworks. “Fiscal policy should prioritise reducing public debt and establishing and widening buffers to address spending pressures and economic shocks,” the report said.
For advanced economies, the IMF recommends tackling the challenges of ageing populations through pension and healthcare reforms, alongside tax base expansion. In emerging markets and low-income countries, it stressed the need to improve tax systems, implement gradual and credible fiscal consolidation plans, and pursue debt restructuring where necessary.
“Governments should focus on building public trust, ensuring fair taxation, and managing resources wisely,” the report concluded. “By doing so, they can foster resilience and promote sustainable growth in uncertain times.”
