While the global economy is still trying to recover from successive crises, a new announcement from the IMF reveals a mixed trend: global public debt will reach 100,000 billion dollars by the end of 2024. This dizzying sum, equivalent to 93% of global GDP, constitutes a critical point in the budgetary management of States. The world now finds itself at a crossroads where the management of this colossal debt becomes more crucial than ever.
IMF alerts on the inevitable rise in debt
The IMF revealed in its report on public finances (Fiscal Monitor) that global public debt should cross the $100,000 billion mark by the end of 2024. “If, as in 2023, it should representing 93% of global GDP this year, it continues to increase and worries our forecasts,” said declared Era Dabla-Norris, deputy director of the budgetary affairs department at the IMF. The institution even anticipates that this ratio will reach 100% of global GDP by the end of the decade. Such a trend seems difficult to reverse. According to the IMF, this increase is directly linked to the accumulation of crises since the Covid-19 pandemic, which disrupted global economies with an increase in public spending.
In addition to the direct impacts of the pandemic, several major economic powers, notably the United States and China, continue to see their debt increase without showing concrete signs of stabilization. The IMF report highlights that an annual reduction in public debt of 3.8% of GDP would be necessary to reverse this trend by 2030. However, the budgetary adjustments announced so far, which are closer to 1%. of GDP, are not enough to halt the current progression. Also, this divergence between forecasts and reality accentuates the IMF's concerns about the sustainability of public debts in the long term.
Direct consequences on growth and global inequalities
The inexorable rise in global public debt not only poses fiscal sustainability challenges, but also threatens to dampen long-term economic growth. Indeed, the IMF warns that a poorly calibrated reduction in public spending could have dramatic repercussions on economic growth, particularly in developing countries. “A significant reduction in public spending could lead to increased inequality and increased pressure on the most vulnerable populations,” the report warned. In addition, it highlights the delicate balance that governments must find in the management of their public finances.
In addition, the poorest countries, already hit hard by the pandemic, continue to suffer the harmful effects of record debt levels. The World Bank estimates that to achieve their development goals, these nations would need to invest the equivalent of 8% of their GDP each year, a goal that is difficult to achieve without massive external aid. This context reinforces the need for States to restructure their finances, and to continue to invest in essential sectors such as the fight against climate change and the reduction of inequalities. The outlook, although complex, requires rigorous management of public finances to avoid a new global crisis.
Global public debt is approaching a point of no return. As states try to reconcile economic growth and debt reduction, the challenges continue to pile up. Budgetary adjustments will be crucial to avoid an even more serious crisis, but they will have to be carried out cautiously so as not to compromise necessary investments in key sectors. Thus, the coming decade promises to be decisive, and governments will have to act quickly to prevent global debt from becoming an insurmountable burden.
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