Concerns as global public debt may exceed $100tn by end-2024

Is global public debt probably worse than it looks?
According to some IMF economists, global public debt is very high. It is expected to exceed $100tn, or about 93% of global gross domestic product by the end of this year and will approach 100% of GDP by 2030.
This is 10 percentage points of GDP above 2019, before the pandemic, noted IMF’s Era Dabla-Norris, Davide Furceri, Raphael Lam and Jeta Menkulasi.
While the picture is not homogeneous — public debt is expected to stabilise or decline for two thirds of countries — the ‘October 2024 Fiscal Monitor’ shows that future debt levels could be even higher than projected, and much larger fiscal adjustments than currently projected are required to stabilise or reduce it with a high probability.
The report argues that countries should confront debt risks now with carefully designed fiscal policies that protect growth and vulnerable households, while taking advantage of the monetary policy easing cycle.
The fiscal outlook of many countries might be worse than expected for three reasons: large spending pressures, optimism bias of debt projections, and sizeable unidentified debt.
Previous IMF research has shown that fiscal discourse across the political spectrum has increasingly tilted toward higher spending. And countries will need to increasingly spend more to cope with ageing and healthcare; with the green transition and climate adaptation; and with defence and energy security, due to growing geopolitical tensions.
On the other side, past experience suggests that debt projections tend to underestimate actual outcomes by a sizeable margin. Realised debt-to-GDP ratios five-years ahead can be 10 percentage points of GDP higher than projected on average.
The Fiscal Monitor presents a novel ‘debt-at-risk’ framework linking current macro-financial and political conditions to the entire spectrum of possible future debt outcomes.
This approach goes beyond the typical focus on the point estimates of debt forecasts and helps policymakers quantify risks to the debt outlook and identify their sources.
This framework shows that in a severely adverse scenario global public debt could reach 115% of GDP in three years — nearly 20 percentage points higher than currently projected. This could be due to several reasons: weaker growth, tighter financing conditions, fiscal slippages, and greater economic and policy uncertainty.
Importantly, countries are increasingly vulnerable to global factors affecting their borrowing costs, including spillovers from greater policy uncertainty in systematically important countries, such as the United States.
Sizeable unidentified debt is another reason for public debt to end up being significantly higher than projected. An analysis of more than 30 countries finds that 40% of unidentified debt stems from contingent liabilities and fiscal risks governments face, of which most are related to losses in state-owned enterprises.
Historically, unidentified debt has been large, ranging from 1 to 1.5% of GDP on average, and it increases sharply during periods of financial stress, IMF noted.
If public debt is higher than it looks, current fiscal efforts are likely smaller than needed.
Fiscal adjustment plays a crucial role in containing debt risks, IMF noted.