IMF warns of soaring global debt levels as countries face tough economic choices
IMF Director for Fiscal Affairs Department, Vitor Gaspar; flanked by Deputy Director for Fiscal Affairs Department, Era Dabla-Norris; and Davide Furceri, Division Chief for Fiscal Affairs Department during the released of the IMF's Fiscal Monitor report in Washington D.C. on Wednesday.
The International Monetary Fund (IMF) has issued a stark warning that over one-third of countries are set to experience an increase in public debt by 2025, compared to the previous year.
The concerns arise amidst escalating uncertainties and significant policy shifts that are altering economic and fiscal landscapes globally..
According to the IMF's Fiscal Monitor report released on Wednesday, these economies collectively represent about 75% of global GDP and included major players— China and the United States—as well as Australia, Brazil, France, Germany, Indonesia, Italy, Mexico, Russia, Saudi Arabia, South Africa, and the United Kingdom.
The Fiscal Monitor projects global public debt to increase by 2.8 percentage points this year—more than twice the estimate for 2024—pushing debt levels above 95% of world gross domestic product.
Vitor Gaspar, IMF director for the fiscal affairs department, said global public debt was high and rising.
Gaspar said policymakers were facing tough tradeoffs between reducing debt, meeting urgent spending needs and maintaining growth. She said getting fiscal policy right was essential at a time of heightened uncertainty.
'Debt risks were already elevated. According to the Fiscal Monitor's debt-at-risk, which utilizes data up to December 2024, in a severely adverse scenario global public debt could reach 117% of GDP by 2027. This would represent the highest level since World War II, exceeding reference projections by almost 20 percentage points,' Gaspar said.
'Risks to the fiscal outlook have further intensified. Debt levels may rise even further than the debt-at-risk estimates if revenues and economic output decline more significantly than current forecasts due to increased tariffs and weakened growth prospects.
'Additionally, escalating geoeconomic uncertainties could heighten debt risks, driving up public debt through increased expenditures, particularly in defense. Demands for fiscal support could also rise for those vulnerable to severe disruptions from trade shocks, pushing up spending.'
Global public debt projections have been revised upwards, while tariffs, uncertainty and market volatility, increased defense spending, and challenging foreign aid are intensifying risks.
The Fiscal Monitor estimates that a significant rise in geoeconomic uncertainty could lead to a public debt increase of approximately 4.5% of GDP in the medium term.
Gaspar said countries must implement gradual fiscal adjustments within credible medium-term frameworks to reduce debt and build buffers against heightened uncertainty.
She said reforms to major expenditure programs, such as energy subsidies and pensions, were crucial to reducing fiscal vulnerabilities while fostering growth.
'Countries with limited room in government budgets should implement gradual and credible consolidation plans and allow automatic stabilizers, like unemployment benefits, to work effectively,' Gaspar said.
'Any new spending needs should be offset by spending cuts elsewhere or new revenues. For countries with greater fiscal flexibility, it is important to utilize available resources judiciously within well-defined medium-term plans. Fiscal support for businesses and communities impacted by severe trade dislocations should be both temporary and targeted, with a strong emphasis on transparency and effective cost management.
'Additionally, fiscal policy, alongside other structural policies, should focus on enhancing potential growth. This can help ease challenging tradeoffs between growth and debt sustainability. For instance, well-designed pensions and energy subsidy reforms can generate savings that can be used to support social programs and infrastructure investments.'
BUSINESS REPORT
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
IOL News
6 hours ago
- IOL News
India surpasses Japan to become the world's 4th largest economy
This pivotal moment led by India Prime Minister Narendra Modi underscores India's commitment to amplifying the voice of the Global South and fostering deeper ties with Africa. Image: EPA-EFE/HEIN HTET IN a defining moment within our Epoch, India has officially overtaken Japan to become the fourth-largest economy in the world. As confirmed by leading assessments from the International Monetary Fund (IMF), World Bank, and other key institutions. This milestone is not just a reflection of economic growth; it is a powerful statement about the rising potential of the Global South, particularly for countries within the BRICS+ nations. Projections also indicate that India is on course to overtake Germany by 2027, further cementing its position on the global stage. For our Centre, focused on exploring alternative pathways for the Global South and the BRICS+ framework. India's rise provides profound insights and tangible lessons as we collectively navigate the challenges of colonial legacies, pervasive poverty, and stark inequality. India's journey also aligns with our research focus on the developments centred around the African Union (AU), with particular interest in its recent role as chair of the 2023 G20, during which the AU was granted permanent membership after India's proposal for the AU's full membership into the G20. This pivotal moment, led by Indian Prime Minister Narendra Modi, underscores India's commitment to amplifying the voice of the Global South and fostering deeper ties with Africa. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Next Stay Close ✕ For many pundits, India's rise to this unprecedented economic status was not a product of chance. This pivotal development signifies India's commitment to elevating the voice of the Global South and fostering deeper economic ties with Africa. For our Centre, focused on exploring alternative pathways for the Global South, India's journey serves as both a profound inspiration and a valuable guide as we collectively address the enduring challenges of colonial legacies, pervasive poverty, and stark inequality. While we recognise ongoing challenges such as equitable growth and job creation, key catalytic projects under Modi's leadership have catapulted India to the table of nations. This can largely be attributed to the decisive leadership of Modi. Under his stewardship since 2014, India has ascended to become a formidable IT resource hub, with talented Indians now at the helm of some of the largest fintech companies globally. This remarkable transformation exemplifies Modi's vision for an economically vibrant and technologically advanced nation. Our continent stands at a crucial turning point in its journey. Our collective histories speak of tales of colonial exploitation, and our current realities contend with poverty, inequality, and enduring unemployment. Africa and India are still behind the Global North and Advanced Asia, but India is quickly catching up, having embraced its colonial past not as an impediment but a lesson of courage and resilience. India's remarkable rise to become the world's fourth-largest economy demonstrates that with visionary leadership and political will, we, too, can transition from the peripheries of the global economy. It is possible, and India is paving the way for a new path to prosperity for its population of more than 1.2 billion people. The Global South is rising. India's position should serve as a realignment of the global economic order, emphasising the power of South-to-South cooperation. India's achievement in becoming the world's fourth-largest economy within our lifetime is not merely an Indian milestone; it is a beacon of hope for Africa and a testimony to what is attainable. 'The last shall be first and the first shall be the last.' India's achievement is not only a milestone for India, it serves as a beacon for Africa and reaffirms that countries of the Global South can transform their economic futures and their fate. We truly draw inspiration from these moments. * Phapano Phasha is the chairperson of The Centre for Alternative Political and Economic Thought. ** The views expressed here do not reflect those of the Sunday Independent, IOL, or Independent Media.
IOL News
3 days ago
- IOL News
How South Africa's G20 Presidency transforms infrastructure finance in Africa
President Cyril Ramaphosa said recently that his US counterpart Donald Trump, has agreed that the US should continue playing a key role in the G20. Image: Supplied/GCIS IN 2025, South Africa assumed the presidency of the G20, becoming the first sub-Saharan African nation to lead the world's most influential economic forum. This milestone comes at a critical juncture for both the global economy and the African continent. Against the backdrop of widening inequality, climate instability, and calls for more equitable global governance, South Africa's leadership offers an opportunity to reshape international economic priorities through a lens of inclusivity, resilience, and long-term development. Under the theme Solidarity, Equality, and Sustainability, South Africa has used its presidency to elevate issues that have long defined the Global South — access to infrastructure finance, food security, digital transformation, and institutional reform. With the G20 representing 85% of global gross domestic product (GDP), 75% of world trade, and two-thirds of the global population, this platform provides unparalleled leverage to influence how capital flows, how development is financed, and how emerging markets can take a more active role in setting the rules of the global economy. South Africa has set the tone for a presidency driven not by rhetoric but by results. The presidency includes chairing more than 200 meetings of ministers, officials, and international organisations such as the IMF and World Bank, culminating in a summit of Heads of State and Government. Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ These engagements are already shaping discourse on sustainable economic recovery, digital infrastructure, climate resilience, and more equitable access to capital. South Africa has used its platform to champion the unique challenges faced by developing economies, particularly in Africa, while pushing for systemic reforms in global economic governance. One of the core priorities for South Africa's G20 presidency is expanding access to capital for infrastructure — a pressing concern not only for South Africa but across the African continent. Africa's infrastructure deficit, estimated at more than $100 billion (R1.8 trillion) a year, continues to hinder growth, integration, and competitiveness. Traditional funding models — reliant on sovereign debt or limited public resources — are insufficient to meet the scale of need. South Africa is advocating for blended finance structures that combine concessional funding from development institutions with private sector investment. These models help reduce investor risk while crowding in private capital for long-term infrastructure projects in transport, energy, water, and telecommunications. The G20 Infrastructure Working Group, under South Africa's chairship, is pushing for reforms that make such finance more accessible, transparent, and catalytic. A key focus has been on improving credit enhancement tools, lowering the cost of capital for African countries, and standardising project preparation processes to improve bankability. South Africa's National Treasury and development finance institutions are leading by example, offering replicable models in renewable energy and logistics. South Africa's ability to lead on financial innovation is underpinned by the strength of its own financial services sector. Recognised globally for its stability and sophistication, the South African banking system is one of the most advanced in emerging markets. Institutions such as Standard Bank, FirstRand, Absa, and Nedbank operate with robust capital buffers, strong governance, and active engagement in infrastructure finance across the continent. The Johannesburg Stock Exchange (JSE) remains Africa's most liquid capital market, while the country's insurance and pension sectors collectively manage more than R5trln in assets. Regulatory bodies such as the SA Reserve Bank (SARB) and Financial Sector Conduct Authority (FSCA) ensure prudential oversight in line with global standards. This mature financial ecosystem positions South Africa not only as a credible G20 partner but also as a financial gateway to Africa. As G20 president, it is championing mechanisms that allow institutional investors to participate more meaningfully in infrastructure development, unlocking a new asset class that delivers both economic and social returns. Another dimension of the G20 presidency's impact lies in the potential it holds for African entrepreneurship. Across the continent, entrepreneurs are building solutions in clean energy, mobility, fintech, agritech, and logistics — often filling gaps left by public infrastructure. Yet access to scale-up capital, exposure to global markets, and integration into value chains remain significant barriers. South Africa's G20 leadership is helping to reposition these innovators as central actors in development. The presidency has promoted inclusive procurement frameworks, G20-backed innovation hubs, and SME-focused financing tools that aim to reduce barriers to entry for African businesses. Through public-private dialogues and policy discussions, the G20, under South Africa's guidance, is highlighting how local entrepreneurs can be integral to infrastructure rollouts —from smart metering in cities to solar microgrids in rural communities. This signals a shift in how the global economy sees African enterprise, not as recipients of aid but as drivers of innovation, employment, and resilience. Agriculture, a lifeline for millions across the continent, is another central theme of South Africa's presidency. With shifting climate patterns and increased food insecurity, the G20 is being mobilised to focus on food systems that are both productive and climate-resilient. South Africa is drawing attention to the dual role its agricultural sector plays — as a food supplier to the region and a testbed for climate-smart technologies. Investments in irrigation, transport logistics, cold chains, and digital platforms for farmers are being showcased as scalable models. The presidency is calling for greater investment in regional food corridors and cross-border agricultural trade to bolster food security. Beyond finance and development, South Africa's G20 presidency is a call for structural reform. The current architecture of global economic governance — from the IMF to credit rating agencies — remains skewed toward the interests and assumptions of high-income countries. South Africa has been vocal in calling for a more balanced and inclusive system. Central to this is the push for IMF quota reform, enabling greater voice and vote for African countries. South Africa is also urging the G20 to examine how international institutions assess environmental and social impacts, particularly in the developing world. Reforms could include more localised frameworks, better representation in decision-making, and stronger mandates to support just transitions. The presidency is facilitating discussions on the division of responsibility between international organisations and member states, with the goal of ensuring that global policies better reflect local realities and development pathways. The benefits of hosting and leading the G20 are not limited to policy influence. They include tangible economic gains for South Africa itself: increased visibility to global investors, enhanced tourism and conferencing activity, and a sharpened diplomatic presence. Moreover, the presidency allows South Africa to spotlight its strategic industries —renewables, financial services, agritech, and manufacturing — and secure stronger bilateral and multilateral cooperation. It is also an opportunity to advance regional priorities such as the African Continental Free Trade Area (AfCFTA), digital integration, and cross-border infrastructure development.
TimesLIVE
4 days ago
- TimesLIVE
Ethiopia's cabinet approves 31% budget increase for 2025/26
Ethiopia's cabinet has approved a nearly 2-trillion birr (R265.12bn) budget for the 2025/26 financial year starting in July, a 31% increase from the previous year, the prime minister's office said on Thursday. The East African nation, which struck a four-year deal with the International Monetary Fund (IMF) last July, is in the midst of far-reaching economic reforms, including the floatation of its birr currency and a push to restructure its debt. Last week Ethiopia and the IMF reached a staff-level agreement on the third review of the $3.4bn (R60.83bn) loan programme from the lender. The 2025/26 budget will support national security, increase production and productivity, and help people affected by disasters, the prime minister's office said in a statement, adding that it will be sent to the parliament for approval. In June last year Ethiopia set spending for 2024/25 at 971.2-billion birr (R128.74bn), and in November said it planned to spend a further 581.98-billion birr (R77.15bn) to help subsidise costs of fertiliser, oil, fuel and medicine.
