Washington: The International Monetary Fund (IMF) says global public debt is projected to grow above 100 per cent of Gross Domestic Product (GDP) by 2029. The Director of the Fiscal Affairs Department, IMF, Vitor Gaspar, gave the projection while presenting the fund’s fiscal monitor.
According to News Agency of Nigeria, Gaspar noted that in such a scenario, public debt would be at its highest level since 1948. He emphasized that public debt risks are widespread and tilted towards debt accumulating even faster, urging policymakers to act promptly to control debt and contain associated risks.
Gaspar explained that the period between the global financial crisis and the COVID-19 pandemic experienced unusually easy conditions for sustaining debt. However, he pointed out that while rising debt was previously accompanied by falling interest rates, which led to a stable interest bill on budgets, the current situation has changed dramatically with increased interest rates and uncertain future trends.
He expressed concerns about the potential for financial turmoil driven by fiscal financial feedback loops and stressed the need for countries to mobilize fiscal policy to ensure debt sustainability and prepare buffers for future adverse shocks. Gaspar highlighted the importance of prioritizing fiscal policy to support debt sustainability and create fiscal buffers for severe adverse scenarios, including financial crises.
The IMF report suggested that fiscal policy should focus on ensuring debt sustainability and creating buffers against future uncertainty. Gaspar mentioned that although political challenges are significant, solutions lie in improving growth prospects and strengthening trust in governance through better institutions and governance.
The News Agency of Nigeria reports that the Fiscal Monitor explores how governments can enhance economic growth prospects by improving the efficiency and composition of public spending. It recommends redirecting public spending towards sectors like infrastructure, education, health, and research and development to achieve long-term output gains without increasing overall spending. Additionally, closing efficiency gaps and institution-building are cited as effective strategies to magnify these gains.
