The International Monetary Fund expects global public debt to exceed $100 trillion for the first time this year, with the possibility of it growing faster than expected as a result of increased government spending, in light of slow growth that raises borrowing needs and costs.
The latest issue of the International Monetary Fund’s Fiscal Monitor report showed that global public debt will reach 93 percent of GDP by the end of the year, representing an increase of 10 percentage points compared to 2019 levels.
These concerns come as the US presidential elections approach, with both candidates pledging to provide new tax cuts and increased spending, which could add trillions of dollars to the federal deficit.
The report also indicated that debt may rise significantly as a result of weak growth, more stringent financing conditions, and increased uncertainty about financial and monetary policies in major countries such as the United States and China.
The report also includes an “extreme adverse scenario” to assess risks to the debt outlook, with estimates suggesting that global debt at risk could exceed baseline projections by about 20 percentage points in the next three years, reaching 115 percent of GDP by 2026.
The report attributes this scenario to the fact that the rise in current debt levels enhances the impact of tightening financial conditions and the rise in return spreads, in addition to the impact of declining growth on future debt levels.