In its latest Fiscal Monitor blog post, the IMF warned that escalating tariff tensions and countermeasures are amplifying market volatility, weakening growth prospects and putting global public debt on an upward trajectory.
After a series of new tariff announcements by the United States and retaliatory actions by its trading partners, finance leaders face rising yields in major economies and widening spreads in emerging markets. These shifts come on top of already strained public finances, often tasked with funding permanent spending increases such as defense budgets.
Data from the IMF show global public debt climbing by an estimated 2.8 percentage points of GDP this year, pushing it above 95%. With current trends, debt could near 100% of GDP by 2030, surpassing levels seen during the pandemic.
Under a severely adverse scenario where revenues decline sharply, the IMF’s debt-at-risk analysis points to public debt hitting 117% of GDP by 2027, the highest level since World War II.
The IMF also flagged secondary impacts: volatile commodity prices, limited fiscal space for social programs and reduced foreign aid for low-income countries. Tighter financial conditions in the United States could trigger ripple effects, raising financing costs for developing economies.
To navigate this uncertainty, the IMF urges countries to put their finances in order by strengthening fiscal frameworks, adopting prudent policies and building public confidence. Such measures can help cushion against shocks, support sustainable growth and keep debt on a safer path.
Reference(s):
cgtn.com
