IMF calls for urgent fiscal reforms, says global debt’ll hit 100% of GDP by 2029

The International Monetary Fund (IMF) has warned that global public debt is projected to reach 100 per cent of Gross Domestic Product (GDP) by 2029.

The IMF urged governments to urgently strengthen public finances as rising borrowing costs, persistent spending pressures and costly energy subsidies narrow their room for economic manoeuvre.

The warning was issued during the presentation of the October 2026 Fiscal Monitor at the ongoing IMF and World Bank Annual Meetings in Bangkok, Thailand, on Wednesday, October 14, 2026.

The Fund said global public debt rose to 94 per cent of GDP in 2025, with the accumulation driven largely by major economies, while rising interest rates and mounting expenditure commitments were making debt stabilisation increasingly difficult.

Presenting the report, the Director of the IMF’s Fiscal Affairs Department, Rodrigo Valdés, said the resilience of global economic activity had not translated into a meaningful improvement in fiscal outcomes, warning that the window for orderly fiscal adjustment was narrowing.

Valdés said governments needed to act before worsening market conditions forced more painful adjustments.

He stated that although the fund expected fiscal balances to improve, the projected outcome was not guaranteed, particularly as governments faced competing demands from social spending, defence, healthcare and other development priorities.

He added that higher interest rates were gradually increasing debt-servicing costs because governments refinanced their obligations over several years.

The IMF director said as existing debt was refinanced at higher rates, interest payments were expected to place additional pressure on public budgets.

Valdés highlighted the importance of the interest-growth differential, which measures the difference between the interest rate on public debt and the rate of economic growth.

According to him, when interest rates rise above economic growth rates, debt tends to accumulate more rapidly relative to GDP, making it harder for governments to stabilise their debt burdens, particularly when they continue to run primary deficits.

Valdés noted that the differential was becoming less favourable across advanced and emerging market economies, increasing the risk of further debt accumulation.

IMF forecasts 3.1% global economic growth in 2026

Also speaking, the Division Chief of IMF Fiscal Affairs Department, David Furceri, said beyond subsidy reforms, IMF had urged emerging and developing economies to improve domestic revenue mobilisation by broadening tax bases, removing inefficient exemptions, simplifying tax systems, and strengthening tax administration.

Furceri added that countries could generate additional revenue by addressing weaknesses in tax policy and improving compliance without necessarily imposing higher tax rates across the board.

He cited research showing that tax administration reforms in some countries had generated additional revenue equivalent to almost two per cent of GDP.

Furceri also warned that complicated tax procedures could discourage investment and hurt the productivity of small and young businesses.

Furceri recommended tax systems that reduced unnecessary economic distortions while improving the efficiency of revenue collection.

For countries with low tax bases, Furceri said stronger domestic revenue mobilisation was necessary to meet debt-servicing obligations and finance essential development programmes.

The IMF official, however, cautioned that governments must also improve spending efficiency, protect investment in education, healthcare and infrastructure, and direct social assistance towards those most in need.