Press Briefing Transcript: Fiscal Monitor, Spring Meetings 2025

IMF News, April 24, 2025

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Published: April 24, 2025

Global debt outlook and macroeconomic context

Since the last Fiscal Monitor in October 2024, global economic prospects have "significantly deteriorated" and risks are "elevated and tilted to the downside."
Uncertainty is "very high," confidence has been weakening, financial markets have partially corrected, and financing conditions have tightened.
Global public debt is "very high and rising." According to the WEO reference projection in 2025:
- Global public debt will "rise above 95 percent of GDP."
- It will be "approaching 100 percent of GDP by the end of the decade," surpassing the pandemic peak.
Global public debt rose "above $100 trillion in 2024."
The evolution of debt hides wide diversity across countries; bubbles in the IMF figure represent countries with bubble size indicating GDP.

Distributional patterns and concentration of risks

119 countries are above the horizontal axis in the IMF chart (public debt higher than pre‑pandemic).
Top‑right quadrant (public debt higher and rising faster):
- Includes "59 countries" — about one third of the "175 countries" in the chart.
- These 59 countries represent "80 percent of world GDP."
Remaining group:
- "116 countries" represent "about 20 percent of world GDP."
- For these 116 countries, aggregate public debt is now "well below pandemic levels" but is "very flat," indicating stabilization at high levels.

Public‑debt‑at‑risk tool and severe scenario projections

The Fiscal Monitor uses a "public‑debt‑at‑risk" tool to quantify the distribution of debt risks around the referenced projection.
According to this tool:
- "Global public debt three years ahead would come at 117 percent of GDP in a severe adverse scenario."
Recent developments (sharpening uncertainty, tightening financing conditions, visible financial market volatility, intensified spending pressures) push public debt at risk even higher and may mean the tool "may be under‑estimating tail risks."

Emerging market and developing economies (EMDEs): key risks and impacts

Three highlighted sources of uncertainty for EMDEs:

1. Escalating tariffs and geoeconomic uncertainty:

Geoeconomic uncertainty "can push up debt over the medium term by about 4.5 percentage points" globally; for emerging market economies it "could be as high as 6 percent of GDP."
Mechanisms: dampened growth, lower revenues, higher spending → deteriorating fiscal positions and higher debt.

2. More volatile financial conditions:

Fiscal Monitor analysis: "100 basis point increase in U.S. nominal Treasury yields translates into 100 basis point increase in emerging market economies' borrowing costs," lasting "for several months."

3. High debt and rising interest expenses:

"1 percentage point of GDP increase in interest expenses results in crowding out of other essential items within the budget, such as social spending and infrastructure investment."

Fiscal policy priorities and policy recommendations

Three cross‑cutting policy priorities advocated for most countries:
- Fiscal policy should be part of overall stability‑oriented macroeconomic policies.
- Fiscal policy should in most countries "aim at reducing public debt and rebuilding buffers" via a credible medium‑term framework.
- Fiscal policy should, together with other threshold policies, "aim at improving potential growth" to ease policy tradeoffs.
Specific reform recommendations for EMDEs:
- Gradual fiscal adjustment within a credible medium‑term fiscal framework.
- Revenue mobilization through:
- Expanding the tax base.
- Eliminating energy subsidies and other distortionary subsidies.
- Strengthening tax administrations.
- Reprioritizing spending and improving spending efficiency.
- Implement politically sensitive reforms (energy subsidies, pensions) with gradualism, timely accompanying measures, strong communication, and targeted compensatory mechanisms to protect the most vulnerable.
Institutional recommendations:
- Strengthen fiscal institutions, medium‑term fiscal frameworks, and Public Financial Management to reduce fiscal uncertainty and provide a credible anchor for policy.

Reforms: energy subsidies and pensions — implementation lessons

Energy subsidies:
- Account for about "1.5 percent of GDP on average in emerging markets and developing economies."
- Benefits of reform: increased energy efficiency, fiscal savings for social spending and infrastructure, reduced regressivity of subsidies.
- Successful implementation strategies:
- Gradual, preannounced reforms (example cited: Colombia implemented reform "over a two‑year period").
- Timely, visible accompanying measures (cash or targeted transfers, social program investment).
- Well‑communicated reforms that build consensus and explain tradeoffs (example cited: Morocco's comprehensive communication strategy).
Pensions:
- Pension spending: "in the case of advanced economies, it is 8 percent of GDP; in emerging market, about four."
- Projected increase in pension spending due to rising life expectancy and retirement.
- Reform design lessons: gradual and timely reforms, strategic communication, stakeholder engagement, possibly presenting gradual increases in retirement age, bipartisan commissions, and strengthening financial literacy.

Country and regional notes (as discussed in the briefing)

Spain:
- Spain's relatively strong fiscal and economic position allows scope to front‑load adjustment.
- Suggested path: "Accumulative adjustment of about 3 percent of GDP over the next three years, say 2025 to 2029," more frontloaded than previously envisaged, to put debt on a downward trajectory.
South Africa:
- General government deficit was "about 6 percent of GDP in 2024."
- IMF projects the fiscal deficit in 2025 to be "around 6.6 percent of GDP" (subject to uncertainty), driven by higher spending.
- Differences with authorities' projections stem from more conservative assumptions on tax buoyancy and achievable primary spending compression.
- Rising interest rates and potential increases in spreads are a concern for financing costs.
Nigeria:
- Nigeria implemented a difficult energy subsidy reform and scaled up transfers.
- Policy emphasis: generate additional fiscal savings, scale up social protection and investment, strengthen spending prioritization and efficiency, and reinforce fiscal institutions and medium‑term frameworks.
ASEAN and Thailand:
- Wide variation across ASEAN; on average debt‑to‑GDP ratios in ASEAN are lower than in other EMDEs.
- Thailand's debt is "over 60 percent of GDP," slightly more elevated relative to other ASEAN countries.
- Advice: prudent and parsimonious fiscal policy, temporary and targeted measures in response to tariff uncertainty, and implementation of ongoing consolidation plans to bring debt down sustainably.
Latin America:
- Region faces spending rigidities (mandatory spending on pensions, wages, transfers) limiting fiscal flexibility.
- Since the pandemic, expenditure increases have outpaced revenue gains; for many countries debt levels continue to rise.
- Recommendation: implement announced consolidation plans within credible medium‑term frameworks, strengthen fiscal rules where present, mobilize revenue, and reprioritize spending to create room for priority investments and social spending.

Risk management and urgency

Elevated uncertainty and downside risks create urgency for policy action:
- "There is still time to adopt policies that improve resilience" and to think through relevant vulnerability scenarios for individual countries, regions, or systems.
- Countries with ample fiscal space and easy market access performed better during the pandemic; building buffers is therefore critical.
The Fiscal Monitor emphasizes that fiscal policy should be "an anchor for confidence and stability" and that Ministers of Finance must "build trust, tax fairly, spend wisely and take the long view."

Press Briefing Transcript: Fiscal Monitor, Spring Meetings 2025 — April 23, 2025