* Says public debt at about 100% of GDP worldwide set to climb further
*Raises concerns over surge in global interest rates
*Urges central banks to focus on price stability mandate, fiscal authorities on credible medium-term consolidation plans
Ndubuisi Francis in Abuja
The International Monetary Fund (IMF) has expressed strong commitment to engaging with member-countries in addressing global imbalances, raising concerns that public debt–at almost 100 per cent of gross domestic product (GDP) worldwide, now exceeds its post-World War II levels, and is set to climb further.
IMF Managing Director, Kristalina Georgieva, made the disclosure at the conclusion of the G20 Finance Ministers and Central Bank Governors’ Meeting in the United States of America.
She noted that since April, the global growth outlook for 2026 had firmed at around 3 per cent, with the global economy absorbing the impact of the energy supply shock better than expected, through the use of oil and gas reserves, new sources of energy, and demand management measures.
According to her, surging Artificial Intelligence (AI) investment—including in power projects to satisfy energy needs—is driving growth, in the US in particular, and in other economies integrated into the AI value chain, such as Korea.
“But behind the averages, there is significant divergence in economic fortunes and risks to the outlook remain high.
“First, the energy shock is not over. The Strait of Hormuz remains largely closed, strategic oil and gas reserves will need restocking, AI drives up energy demand, and in the northern hemisphere winter is coming.
“Second, public debt—at almost 100 per cent of GDP worldwide—now exceeds its post-World War II highs and is set to climb further. Looking back, the debt trajectory resembles a staircase: big vertical steps when shocks occur, little or no reduction afterward.
“Third, the disinflation process has stalled in many countries. Mounting fiscal pressures are pushing core bond yields upward and the interplay between fiscal and monetary policy worries markets.
“Last, but not least, the future impact of AI on productivity and financial stability is dogged by unknowns,” Georgieva said.
She stated that during discussions at the meeting, there was a strong convergence of views around the importance of lifting potential growth everywhere, adding that in a shock-prone and uncertain world, structural reforms and sound fiscal and monetary policies were essential to creating the foundation for stronger and better-balanced global growth.
“Beyond domestic responsibilities of policymakers, the G20 reminds us that international cooperation has a crucial role to play, especially in helping countries manage debt challenges, limit spillovers, and address global imbalances,” Georgieva observed.
On global economic outlook, the IMF chief executive said the global economy absorbed the impact of the energy supply shock better than expected, through the use of oil and gas reserves, new sources of energy and demand management measures.
But behind the averages, she pointed out that there was significant divergence in economic fortunes and risks to the outlook remain high.
Georgieva elaborated: “First, the energy shock is not over. The Strait of Hormuz remains largely closed, strategic oil and gas reserves will need restocking, AI drives up energy demand, and in the northern hemisphere winter is coming.
“Second, public debt—at almost 100 per cent of GDP worldwide—now exceeds its post-World War II highs and is set to climb further. Looking back, the debt trajectory resembles a staircase: big vertical steps when shocks occur, little or no reduction afterward.
“Third, the disinflation process has stalled in many countries. Mounting fiscal pressures are pushing core bond yields upward and the interplay between fiscal and monetary policy worries markets.
“Last, but not least, the future impact of AI on productivity and financial stability is dogged by unknowns.”
She alluded to clear policy priorities, noting that central banks must focus on their price stability mandate, while fiscal authorities must hammer out credible medium-term consolidation plans.
Structural policies, she added, should concentrate on cutting red tape and removing self-inflicted barriers to growth, arguing that stronger potential growth would help address the fiscal problem, while addressing the fiscal problem would help lift growth prospects.
Further on debt challenges in developing countries, Georgieva said the sovereign debt landscape for emerging and low-income countries has gradually improved in recent years, thanks to domestic policy efforts and international cooperation.
But progress, she observed, has been uneven, adding that persistent risks and uncertainty in the global economy, including spillovers from the significant increase in yields in advanced economies, call for policy discipline and underscore the importance of building buffers.
She further noted that the increase in global interest rates was of particular concern, stressing that as key advanced economy yields rise to multi-year highs, they lift most of the world’s yield curves up with them.
“High refinancing needs and rising debt-service costs are constraining many developing economies, in particular low‑income countries, limiting their capacity to finance critical spending on infrastructure, health and education, which undermines growth and, in turn, debt sustainability.
“These challenges are compounded by a sharp decline in net external financing, including cuts in official development assistance, and a marked reduction in new inflows from non‑Paris Club creditors.
“Helping countries create fiscal space to support growth-enhancing spending is even more pressing in the current conjuncture.
Addressing these challenges requires a collective effort along three dimensions:
“First, decisive action is needed in countries where debt is unsustainable, supported by further improvements in restructuring processes. Important progress has already been achieved, particularly under the G20 Common Framework,” she stated.