The International Monetary Fund (IMF) announced on Tuesday that the world’s total public debt is projected to surpass $100 trillion this year for the first time, driven by political sentiment favoring higher spending and the need for increased borrowing amid slow economic growth.
According to the latest Fiscal Monitor report, global public debt is expected to reach 93% of global GDP by the end of 2024, inching closer to 100% by 2030—exceeding the previous peak of 99% during the COVID-19 pandemic and reflecting a 10 percentage point increase from 2019 levels.
The report, released ahead of the IMF and World Bank’s annual meetings in Washington, highlights factors contributing to this rising debt, including pressures to enhance spending in the U.S., the world’s largest economy.
“Fiscal policy uncertainty has increased, and political red lines on taxation have become more entrenched,” the IMF noted. It cited mounting spending pressures related to green transitions, population aging, security concerns, and ongoing development challenges.
As the U.S. presidential election approaches, both candidates have proposed tax breaks and spending plans that could add trillions to federal deficits. Republican candidate Donald Trump’s tax cut proposals could incur approximately $7.5 trillion in new debt over a decade, while Democratic nominee Kamala Harris’s plans are estimated to add $3.5 trillion, according to the Committee for a Responsible Federal Budget.
The report emphasizes that projections for debt levels often underestimate actual outcomes, with realized debt-to-GDP ratios typically averaging 10% higher than forecasts made five years earlier. Under a “severely adverse scenario” involving weak growth and tighter financing conditions, global public debt could spike to 115% in just three years—20 percentage points above current projections.
The IMF reiterated its calls for fiscal consolidation, urging nations to take advantage of the current environment of solid growth and low unemployment. However, it noted that efforts averaging only 1% of GDP from 2023 to 2029 are inadequate to stabilize debt levels. A cumulative tightening of 3.8% is needed, with even greater measures required in countries like the U.S. and China, where debt is projected to continue rising.
As the U.S. faces an anticipated fiscal 2024 deficit of about $1.8 trillion—over 6.5% of GDP—other nations like Brazil, Britain, France, Italy, and South Africa are also at risk of facing costly consequences from escalating debt.
Era Dabla-Norris, IMF’s deputy fiscal affairs director highlighted that cuts in public investment or social spending tend to negatively impact growth more than poorly targeted subsidies. The report also suggests that some countries have the potential to broaden their tax bases and enhance tax collection efficiency, while others could benefit from more progressive tax systems.
Source: DEW360.NET
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