The International Monetary Fund said on Tuesday that the world’s total public debt is set to exceed $100 trillion for the first time this year, and it could rise faster than anticipated as political sentiment favors more spending and slower growth in borrowing. Increases needs and costs.
International Monetary FundLatest fiscal monitor report revealed global public debt To reach 93% of global GDP by the end of 2024 and 100% by 2030. This will exceed its 99% peak during COVID-19. This would be 10 percentage points higher than 2019, before the pandemic struck. government spending,
Released a week before the annual meeting of the IMF and the World Bank in Washington, the fiscal monitor said there are good reasons to believe that future debt levels could be significantly higher than currently estimated, with the US, the world’s largest economy, having higher debt levels. Willingness to spend is also included. ,
,fiscal policy “Uncertainty has increased, and political red lines on taxation have become more entrenched,” the IMF said in the report. The country is looking to address the green transition, population ageing, security concerns and long-standing development challenges. The pressure of expenditure is increasing.
campaign spending promises
IMF’s concerns about rising debt levels came three weeks ago US presidential election In which both candidates have promised new tax breaks and spending that could add trillions of dollars to the federal deficit.
Republican presidential nominee Donald Trump’s tax cut plan would add about $7.5 trillion in new debt over 10 years, more than double the $3.5 trillion added by Democratic nominee Vice President Kamala Harris’s plans, the Center estimates. According to the Committee for a Responsible Federal Budget (CRFB), a budget think-tank.
Report finds debt projections underestimate actual outcomes by a wide margin debt to gross domestic product The ratio five years ahead is on average 10% higher than the original forecast.
And debt could increase significantly due to weaker growth, tighter financing conditions and greater fiscal and monetary policy uncertainty in systemically important economies such as the US and China. The report includes a “severe adverse scenario” incorporating these factors that shows global public debt could reach 115% in just three years, 20 percentage points higher than the current estimate.
break on expenses
IMF reiterates demand for more Treasury consolidationHe said the current environment of solid growth and low unemployment is the right time to do so. But it said current efforts, averaging 1% of GDP over the six years from 2023 to 2029, are insufficient to reduce or stabilize high-risk debts.
Achieving this target would require a cumulative tightening of 3.8%, but much greater fiscal tightening would be required in the US, China and other countries where GDP is not projected to be stable.
The US is expected to report a deficit of nearly $1.8 trillion in fiscal year 2024, or more than 6.5% of gross domestic product, according to the Congressional Budget Office this month.
It said that the US and other countries where debt is projected to increase, including Brazil, Britain, France, Italy and South Africa, may have to face costly consequences.
“Postponing adjustment would only mean that a major correction is eventually needed, and waiting could also be risky, as past experience shows that high debt and lack of credible fiscal plans trigger adverse market reactions. And limit the scope for countries to deal with future shocks,” said IMF Deputy Director of Financial Affairs Era Dabla-Norris.
He said cuts in public investment or social spending have a far greater negative impact on growth than poorly targeted subsidies like fuel. Dabla-Norris said some countries have room to broaden their tax base and improve the efficiency of tax collection, while others could make their tax systems more progressive by taxing capital gains and income more effectively. Are.
