Global Public Debt Set to Exceed $100 Trillion, Warns IMF

According to a report released by the International Monetary Fund (IMF), the world’s total public debt is poised to surpass $100 trillion this year for the first time. The IMF warns that this figure may rise even more rapidly than previously anticipated, driven by political sentiment favoring increased spending and the growing borrowing needs associated with slow economic growth.

Key Findings from the IMF Report

Global Public Debt Milestone

• The world’s total public debt is projected to exceed $100 trillion for the first time in 2024.
• This figure is expected to reach 93% of global GDP by the end of 2024 and approach 100% by 2030, surpassing the 99% peak seen during the COVID-19 pandemic.

Comparison to Pre-Pandemic Levels

• The debt is anticipated to increase by 10 percentage points from 2019, before the pandemic resulted in significant government spending.

Political Influence on Spending

• Political sentiment in the U.S. and other major economies is leaning towards higher spending, contributing to accelerated debt growth.

Increased spending pressures stem from various factors including

• Green transition initiatives
• Aging populations
• Security concerns
• Ongoing development challenges

Fiscal Policy Uncertainty

• The IMF report indicates growing uncertainty in fiscal policy, with entrenched political red lines on taxation complicating potential solutions.

U.S. Presidential Election Impact

• As the U.S. approaches a presidential election, both candidates have proposed tax cuts and spending plans that could add trillions to federal deficits:
• Donald Trump’s tax cut plans could increase debt by approximately $7.5 trillion over ten years.
• Kamala Harris’s plans are estimated to add about $3.5 trillion.

Historical Underestimation of Debt

The IMF notes that debt projections historically underestimate actual outcomes:

• Realized debt-to-GDP ratios are, on average, 10% higher than initially forecasted five years prior.

Potential Risks to Debt Levels

• Factors such as weak economic growth, tighter financing conditions, and increased fiscal and monetary policy uncertainty in key economies like the U.S. and China could further elevate debt levels.
• The report includes a “severely adverse scenario” suggesting that global public debt could rise to 115% of GDP within three years, which is 20 percentage points higher than current projections.