
IMF says tariff pressures to push global public debt past pandemic levels
Economic pressures from steep new U.S. tariffs will push global public debt above pandemic-era levels to nearly 100% of global GDP by the end of the decade as slower growth and trade strain government budgets, the International Monetary Fund said on Wednesday.
The IMF's latest Fiscal Monitor projected that global public debt will grow 2.8 percentage points to 95.1% of global GDP in 2025. It said the upward trend was likely to continue, reaching 99.6% of global GDP by 2030.
Global public debt peaked in 2020 at 98.9% of GDP as governments borrowed heavily for COVID-19 relief and output shrank. Debt fell 10 percentage points within two years.
But it has been edging back up and the latest forecast showed it accelerating.
"Major tariff announcements by the United States, countermeasures by other countries, and exceptionally high levels of policy uncertainty, are contributing to worsening prospects and heightened risks," the IMF said in the report.
It added that this leaves governments with more difficult trade-offs as their budgets are stretched by higher defense spending needs, demands for more social support and rising debt service costs that could grow with more inflationary pressures.
Governments' annual fiscal deficits are forecast to average 5.1% of GDP in 2025, compared to 5.0% in 2024, 3.7% in 2022 and 9.5% in 2020, according to the report.
SLOWER GROWTH, MORE DEBT
The budget outlook is based on the IMF's "reference forecast" for 2.8% global GDP growth this year in its latest World Economic Outlook, which includes tariff developments through April 4. The economic outlook, as well as the fiscal outlook, would worsen if steeper tariffs from President Donald Trump and retaliatory measures kick in.
Debt levels may rise above 117% by 2027 -- the level forecast in a severely adverse scenario -- "if revenues and economic output decline more significantly than current forecasts due to increased tariffs and weakened growth prospects."
Debt at that level would represent the highest share of GDP since World War Two, the IMF said.
Much of the debt growth is concentrated in larger economies, IMF Fiscal Affairs Director Vitor Gaspar told Reuters. About one third of the IMF's 191 member countries now have debt growing at rates faster than before the pandemic, but they make up about 80% of global GDP, he added.
The rising pressures could prompt increasing demands for social spending, especially in countries vulnerable to severe disruptions from trade shocks, that could push spending higher, the report said.
Adding to difficulties is a pullback in development aid by the U.S. and other wealthier countries, continuing a trend in recent years, "and that means that these countries will face even starker trade-offs than would otherwise be the case," Gaspar said.
U.S. IMPROVEMENT-FOR NOW
The IMF forecasts a slight improvement to U.S. annual budget deficits over the next two years to 6.5% of GDP for 2025 and 5.5% for 2026, compared to 7.3% for 2024. This was due to a combination of increased tariff collections based on announced measures as well as continued U.S. output growth.
"So the performance of U.S. economy has been strong in recent years, and that helps the budget. It helps in the U.S., it helps everywhere," Gaspar said.
But the U.S. forecast assumed that Republican tax cuts passed in 2017 expire at the end of the year as scheduled. The Trump administration wants to extend them, which budget experts said would add some $4 trillion to U.S. debt over a decade without offsets.
China's fiscal deficits are expected to grow sharply in 2025, to 8.6% of GDP from 7.3% in 2024, settling at 8.5% in 2026. Economic stimulus spending was cited by the IMF as a reason that China's 2025 growth forecast held at 4%, partly offsetting a major output drag from tariffs.
Despite the increase in debt pressures, the IMF doubled down on its advice to countries to prioritize public debt reductions to help build fiscal buffers to address future economic shocks, which will require a delicate policy balance.
"Countries with limited room in government budgets should implement gradual and credible consolidation plans and allow automatic stabilizers, like unemployment benefits, to work effectively," the IMF said. "Any new spending needs should be offset by spending cuts elsewhere or new revenues."
(Reporting by David Lawder; Editing by Cynthia Osterman)
Hashtags

Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles


Arabian Post
an hour ago
- Arabian Post
Ethiopia Targets 8.9 % Growth as Budget Widens
Ethiopia's finance minister has announced that the economy is projected to expand by 8.9 % in the fiscal year beginning 8 July 2025, alongside a modest increase in the budget deficit amid structural reforms. Finance Minister Ahmed Shide addressed parliament on Tuesday, outlining the forecast for the next fiscal year, citing an acceleration in real GDP growth from an estimated 8.4 % this year to 8.9 % next year. The state budget deficit is expected to rise slightly to 2.2 % of GDP, compared to 2.1 % in the current year. Total government expenditure is projected at 1.9 trillion birr, equivalent to around US $14 billion. This positive outlook is deeply anchored in ongoing reforms backed by an International Monetary Fund programme. These include the liberalisation of the exchange rate, debt restructuring negotiations, and the establishment of the Ethiopian Securities Exchange, which opened in January after a 50‑year absence. ADVERTISEMENT The cabinet's approval of the new budget earlier this month signalled a strategic reallocation of resources, with spending set to increase by 31 % compared to the previous year's 971 billion birr. A significant portion is earmarked for national security, productivity enhancement, and disaster relief, including continued subsidies for fuel, fertiliser, oil and medicines—a move aimed at dampening inflationary pressure on households. Reforms and their impacts The IMF programme that began in July 2024 has been a linchpin in the reform agenda. In April, State Finance Minister Eyob Tekalign reported that the third review of the four‑year US $3.4 billion loan arrangement had reached staff‑level agreement, with approval by the IMF executive board anticipated this month. Subsequent draws will hinge on continued reform progress, notably debt restructuring. Debt, inflation and exchange rate liberalisation remain pressing concerns. A draft budget revealed that 463 billion birr—nearly 39 % of recurrent expenditure—will go towards debt servicing, surpassing planned capital outlays. The government intends to restructure approximately US $3.5 billion in external liabilities through agreements in upcoming weeks. Bondholder writedowns are expected as part of a broader debt resolution strategy. Monetary reforms have lessened inflation, which reached 29.2 % in 2022/23, and narrowed the spread between official and parallel exchange rates. Foreign reserves have rebounded, tripling to US $3.6 billion, easing foreign exchange shortages. These financial indicators have been central in IMF assessments. Policy makers are awaiting formal debt restructuring talks this summer with official and private creditors alike, guided by the G20 Common Framework. Iran‑timed agreements with Chinese policy banks, the U.S. International Development Finance Corporation and other funders are being explored to support infrastructure and development needs. Regional comparisons and strategic outlook Ethiopia remains one of sub‑Saharan Africa's highest growth economies, although still below the pre‑covid annual average of around 10 %. The country's trajectory continues to be shaped by recovery from the Tigray war, covid‑19 disruptions, droughts and locust invasions, but ongoing reforms are expected to unlock further expansion. The imminent fiscal year budget, combining a steep rise in expenditure with a stabilising deficit, underscores a cautious but ambitious strategy: focusing on debt management, reform momentum and public service delivery, rather than unfettered spending. Key stakeholders, including opposition figures such as Desalegn Chane of the National Movement of Amhara, have voiced concern over rising tax burdens amid steady living costs and a depreciating birr. Criticism has targeted new levies on motor vehicles and excise taxes, with claims these conflict with subsidy policies. The finance minister, however, defended these as necessary for fiscal resilience and revenue expansion. Broader reform dynamics have been influenced by Prime Minister Abiy Ahmed's economic agenda, including the launch of Ethiopia's first stock market since the Haile Selassie era, currency liberalisation, and opening the banking sector to foreign investment. These steps have been deemed essential to securing up to US $27 billion in external funding from IMF, World Bank, UAE, China and others over the next four years. Looking ahead The projection of roughly 8.9 % GDP growth signals confidence that reforms are gaining traction, even as the government prepares to finance a wider budget and service rising debt. The success of the IMF programme's next review, debt restructuring outcomes, and reform implementation will determine whether Ethiopia can sustain its economic momentum and weather domestic and global headwinds.


The National
2 hours ago
- The National
Sheikh Abdullah bin Zayed welcomed to US State Department by Marco Rubio
US Secretary of State Marco Rubio met Sheikh Abdullah bin Zayed, UAE Deputy Prime Minister and Minister of Foreign Affairs, at the State Department on Tuesday. Sheikh Abdullah was greeted by Mr Rubio in Washington a day after Deputy Secretary of State Christopher Landau welcomed UAE Assistant Foreign Minister Lana Nusseibeh to the State Department. US President Donald Trump visited the UAE, Saudi Arabia and Qatar last month for a major trip that saw major business and investment announcements and the US lifting sanctions on Syria. Mr Rubio and Sheikh Abdullah appeared briefly in front of cameras but did not take any questions. Mr Rubio later said that he and Sheikh Abdullah worked to sustain momentum from Mr Trump's "historic visit" to Abu Dhabi. "We discussed economic opportunities, regional security, and humanitarian efforts to mark the growing partnership between the United States and the UAE," Mr Rubio said on X. Mr Landau said in a statement that during Monday's meeting with Ms Nusseibeh, the two discussed security, stability and prosperity in the Middle East as well as a path to ending the conflict in Sudan.


Al Etihad
3 hours ago
- Al Etihad
No class action for Google privacy lawsuit, judge rules
10 June 2025 23:24 (REUTERS)People who accused Google of illegally collecting their personal information - after they chose not to synchronise their Google Chrome browsers with their Google accounts - cannot sue the Alphabet unit as a group in a class action, a US judge a decision on Monday, US District Judge Yvonne Gonzalez Rogers in Oakland, California agreed with Google that it was appropriate to address case-by-case whether millions of Chrome users understood and agreed to its data collection policies."Inquiries relating to Google's implied consent defense will overwhelm the damages claims for all causes of action," Rogers dismissed the proposed damages class action with prejudice, meaning it cannot be brought again. The judge also said Chrome users cannot seek policy changes as a actions let plaintiffs seek potentially greater recoveries at lower cost than they could in individual decision followed a ruling last August by the federal appeals court in San Francisco, which said Rogers should consider whether reasonable Chrome users consented to letting Google collect their data when they browsed users pointed to Chrome's privacy notice, which said they "don't need to provide any personal information to use Chrome" and Google would not collect such information unless they turned on the "sync" had dismissed the case in December 2022. She said she oversees two other privacy cases against Mountain View, California-based Google, but the claims in those cases differed "significantly." The appeals court ruling followed Google's 2023 agreement to destroy billions of records to settle a lawsuit claiming it tracked people who thought they were browsing privately, including in Chrome's "Incognito" mode.