The International Monetary Fund has sounded a sharp warning that global public debt is climbing at an alarming rate and could exceed 100 percent of global GDP by 2029, reaching its highest level since 1948.
In what it described as a growing fiscal time bomb, the Fund cautioned that without decisive reforms, the world could face a new era of financial instability reminiscent of past crises.
Vitor Gaspar, director of the IMF’s fiscal affairs department, said the trend is deeply worrying and could worsen under what he called an “adverse but plausible scenario.” By the end of the decade, he said, global debt could surge as high as 123 percent of GDP — a level just short of the 132 percent peak recorded in the aftermath of World War Two.
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“From our viewpoint, the most concerning situation would be one in which there would be financial turmoil,” Gaspar said in an interview, echoing a separate IMF report released earlier in the week that warned of a possible “disorderly” market correction. “That could unleash a fiscal-financial ‘doom loop,’ like the one that occurred during the European sovereign debt crisis that began in 2010.”
The warning arrives amid growing volatility in the global economy. Tensions between Washington and Beijing have once again flared, raising fears of another trade war that could rattle markets and weigh on global growth. Although the IMF this week slightly raised its 2025 global growth forecast due to what it described as a more benign near-term impact from tariffs, the new escalation — which followed the forecast’s completion — could sharply reverse that optimism.
Gaspar said the combination of heightened uncertainty, geopolitical risks, and persistent inflationary pressures makes it vital for countries to begin rebuilding their fiscal buffers now rather than later.
“With quite significant risks on the horizon, it’s important to be prepared, and preparation requires having fiscal buffers that allow authorities to respond to severe adverse shocks in the eventuality of a financial crisis,” he said.
The IMF’s latest Fiscal Monitor underscores how heavily indebted many of the world’s largest economies have become. Advanced nations such as the United States, Canada, China, France, Italy, Japan, and Britain already have public debt levels above 100 percent of GDP or are projected to breach that threshold in the coming years.
Despite the staggering numbers, the IMF classifies their risk levels as “low-to-moderate,” largely because these economies have deep bond markets, stable institutions, and access to policy tools that can cushion shocks. Yet, for many emerging and low-income nations, the picture is far more precarious. Even with lower debt-to-GDP ratios, they face significantly higher borrowing costs and fewer options to refinance or restructure.
Gaspar noted that borrowing is now far more expensive than during the period between the 2008–2009 global financial crisis and the 2020 pandemic.
“Rising interest rates are pressuring budgets at a time when demands are high due to geopolitical tensions, increasing natural disasters, disruptive technologies and aging populations,” he said.
The IMF’s message is that fiscal consolidation — though politically difficult — cannot be deferred. “While we do recognize that the fiscal equation is very hard to square politically, the time to prepare is now,” Gaspar wrote in a forward to the Fiscal Monitor.
He argued that rebalancing spending toward productive investment, especially in education and infrastructure, could both strengthen economies and soften the blow of fiscal tightening.
The report highlights that reallocating just one percentage point of GDP from current spending to education or other forms of human capital investment could lift GDP by over 3 percent by 2050 in advanced economies, and by almost twice that in emerging markets and developing economies.
The United States, which already breached its postwar debt record during the COVID-19 pandemic, faces a particularly steep challenge. The IMF projects that U.S. public debt could surpass 140 percent of GDP by the end of the decade. Gaspar confirmed that IMF officials will urge Washington to stabilize its debt trajectory when they begin a formal review of the U.S. economy next month.
Fiscal analysts say that the U.S. fiscal outlook has been complicated by mounting defense spending, persistent deficits, and a political climate that makes major tax or entitlement reforms unlikely. Trump administration officials have said they are committed to stabilizing the fiscal picture through targeted spending cuts, though few details have been disclosed ahead of next year’s budget.
China, meanwhile, is also on an unsustainable debt path. The IMF projects its public debt will rise from 88.3 percent of GDP in 2024 to about 113 percent by 2029, driven by state-backed investments, property market bailouts, and aging demographics. The Fund plans a regular Article IV consultation with Beijing next month, during which officials are expected to urge more transparent debt management and fiscal restraint.
Economists warn that both Washington and Beijing, the world’s two largest economies, now face the dual burden of sustaining growth while managing debt that could constrain fiscal space for years to come.
The Fund’s concerns echo those raised in other recent reports warning of a potential debt-driven drag on global growth. In previous research, the IMF found that countries with larger fiscal buffers were able to mitigate job losses and protect economic activity more effectively during crises — notably during the 2008 meltdown and the pandemic shock of 2020.
What distinguishes the current environment, analysts say, is the simultaneous convergence of multiple stress factors: inflation still above target in major economies, surging defense budgets, climate adaptation costs, and the early signs of another trade rift between the U.S. and China.
If financial markets lose confidence in governments’ ability to manage their fiscal trajectories, the IMF warns, the result could be a self-reinforcing spiral of rising borrowing costs and reduced growth — the very “doom loop” Gaspar referenced.
Still, the Fund insists there is a path forward. It calls for countries to prioritize “smart consolidation” — tightening fiscal policy where possible while maintaining or even increasing investment in sectors that raise productivity over the long term.