## FOREWORD ## Source details **Canonical URL:** [FOREWORD](https://www.imf.org/-/media/files/publications/fiscal-monitor/2025/october/english/foreword.pdf) ## Other formats - [Markdown version](/-/media/files/publications/fiscal-monitor/2025/october/english/foreword.pdf.md) - [Structured JSON version](/-/media/files/publications/fiscal-monitor/2025/october/english/foreword.pdf.json) --- ### Global public debt outlook and risks - Global public debt is projected to rise above 100 percent of GDP by 2029. - In such a scenario, public debt would be at its highest level since 1948. - The projected path is higher and steeper than projected before the pandemic. - The distribution of risks is wide and tilted toward debt accumulating even faster. - With a 5 percent risk, debt would reach 124 percent in 2029. - Increasing debt-servicing costs are already pressuring budgets. - Financial asset valuations are stretched, financial stability risks loom large, and the possibility of propagation through fiscal-financial adverse feedback loops is particularly concerning (October 2025 Global Financial Stability Report). - Interest rates have increased considerably in global markets, and their path forward is highly uncertain (October 2025 World Economic Outlook). ### Heterogeneous country situations and fiscal space - Countries differ widely in their deficit and debt levels. - Many major economies have public debt greater than (or projected to go over) 100 percent of GDP. - Although the number of countries with debt above 100 percent will be steadily declining in the next five years, their share in world GDP is projected to rise. - Among the Group of Twenty, these are Canada, China, France, Italy, Japan, the United Kingdom, and the United States. - These countries typically have deep and liquid sovereign bond markets and often broad policy choices, resulting in their fiscal risk considered moderate. - Many emerging markets and low-income countries face tougher fiscal challenges, despite their relatively low debt. - The number of countries with public debt below 60 percent of GDP increased to more than 100 in 2021 and is projected to continue to increase, although their GDP share in the world represents less than 30 percent. - Fifty-five countries are experiencing debt distress or are at high risk of distress despite their debt ratios often below 60 percent of GDP. - When countries falter on debt, timely debt restructuring is critical to containing the damage. - The IMF is working on strengthening the debt architecture, including through the Common Framework and the Global Sovereign Debt Roundtable. - An even better strategy, ex ante, is to maintain safer debt ratios. ### Fiscal pressures and spending demands - Looming expenditures on defense, natural disasters, disruptive technologies, demographics, and development add to public spending demands. - These pressures coincide with sharp political red lines against tax increases and diminished public awareness of fiscal limits. - The persistence of spending above tax revenues will push debt to ever higher heights threatening sustainability and financial stability. ### Policy priorities and fiscal structural policy - Prioritizing fiscal policy is essential to support debt sustainability and prepare fiscal buffers to use in case of severe adverse shocks including financial crises. - Improving growth prospects and enhancing public trust in government help balance the fiscal equation. - Fiscal policy is structural policy; deploying fiscal structural policy improves growth prospects and reinforces complementarities and synergies with the private sector. - The government can change the composition of public spending while keeping the overall envelope fixed. - Tilting the composition of public spending toward growth-friendly areas such as education and infrastructure is highlighted. - The Fiscal Monitor estimates that reallocating 1 percentage point of GDP from current spending to human capital investment leads to an increase of more than 3 percent in GDP by 2050 in advanced economies and almost twice as much in emerging market and developing economies. - Enhancing spending efficiency can further amplify these benefits. ### Revenue mobilization and governance - On the revenue side, countries with insufficient tax capacity should aim at gradually surpassing tax revenues above 15 percent of GDP for a growth takeoff. - Growth dividends from such an approach are estimated to be in double digits over the long term. - More than 70 developing countries still have tax-to-GDP ratios below this level, concentrated in fragile and low-income countries. - Strengthening governance and institutions, and fiscal transparency, can support these efforts, not least by earning public trust. ### Key takeaways - Public debt is on a higher, steeper path than pre-pandemic projections, with downside risks that could push debt much higher (e.g., 124 percent of GDP in 2029 under a 5 percent risk scenario). - Country situations are highly heterogeneous: some high-debt advanced economies retain moderate fiscal risk due to market depth and policy space, while many emerging and low-income countries face constrained options and elevated distress risk even at lower debt ratios. - Rising interest costs, stretched financial valuations, and mounting spending demands increase the urgency of preparing fiscal buffers and implementing structural fiscal policies that enhance growth and resilience. - Reallocating spending toward human capital and infrastructure, improving spending efficiency, raising tax capacity toward and above 15 percent of GDP where feasible, and strengthening governance and transparency are core policy prescriptions. Vitor Gaspar Director Fiscal Affairs Department Rodrigo Valdés Director Fiscal Affairs Department starting October 27, 2025 *International Monetary Fund | October 2025* --- _Source: https://www.imf.org/-/media/files/publications/fiscal-monitor/2025/october/english/foreword.pdf_