The International Monetary Fund (IMF) has issued a stark warning: global public debt is expected to surpass $100 trillion by the end of 2024, reaching a staggering 93% of global GDP.
This marks a significant rise from 2019 levels, where public debt was approximately 10 percentage points lower, prior to the pandemic.
According to the IMF’s latest Fiscal Monitor, while public debt trends may vary across countries – with two-thirds expected to stabilize or decline – the overall trajectory suggests that future debt levels could outpace current projections.
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The report indicates that by 2030, public debt could approach 100% of global GDP.
The growing fiscal pressures stem from a variety of factors, including increased demands for spending on
aging populations
healthcare
climate change adaptation, and
defense and energy security due to geopolitical tensions
These pressures are compounded by overly optimistic debt forecasts and a notable amount of ‘unexplained’ debt, raising concerns about the sustainability of public finances.
Historically, debt projections have often underestimated reality, with debt-to-GDP ratios frequently exceeding forecasts by up to 10 percentage points over five years.
According to the IMF:
“Sizable unidentified debt is another reason for public debt to end up being significantly higher than projected. An analysis of more than 30 countries finds that 40 percent of unidentified debt stems from contingent liabilities and fiscal risks governments face, of which most are related to losses in state-owned enterprises.
Historically, unidentified debt has been large, ranging from 1 to 1.5 percent of GDP on average, and it increases sharply during periods of financial stress.”
The IMF’s introduction of a ‘debt-at-risk’ concept further underscores potential risks, suggesting that macroeconomic conditions could push global debt levels to 115% of GDP within three years, driven by:
slower growth
tighter financial conditions, and
policy uncertainties
As we approach this critical juncture, the implications of rising global debt will be crucial for policymakers and economies worldwide.
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