Global Debt Nears 100% of GDP by 2029: IMF Warning

The International Monetary Fund (IMF) said on Tuesday that the ongoing conflict in the Middle East is adding to pressures that are pushing global public debt higher, as energy and food prices rise and governments face tougher financing conditions.

In its half-yearly fiscal monitor, the IMF reported that global gross government debt reached nearly 94% of GDP last year and is projected to approach 100% by 2029 . The fund said this would bring debt back to a level previously seen only after World War II , underscoring the scale of the fiscal challenge facing many countries.

The IMF linked the latest deterioration in the outlook to disruptions tied to the conflict, pointing in particular to developments after U.S.-Israeli airstrikes on Iran on February 28 . It said the situation has disrupted energy supplies, tightened financial conditions, and contributed to higher government borrowing costs, factors that can quickly worsen debt dynamics for states already carrying heavy liabilities.

The fund warned that a further escalation could be severe enough to trigger a global recession . It added that the United Kingdom could face a larger impact than other G7 economies, highlighting how market sensitivity to fiscal risks can differ even among advanced economies.

Against that backdrop, the IMF said governments are being pulled between supporting households and businesses hit by higher prices and preserving fiscal credibility. It advised that any energy support schemes should be targeted and temporary , with assistance focused on vulnerable populations rather than broad-based measures that can be costly and difficult to unwind.

The IMF also cautioned against responding to the shock by expanding borrowing. Instead, it recommended reallocating existing spending and prioritising crisis-related outlays, presenting this as a more prudent approach to managing the trade-offs created by higher prices and tighter financing conditions.

As a reminder of how quickly sentiment can shift, the IMF said higher debt and fiscal uncertainty can rapidly translate into higher borrowing costs, citing the UK’s 2022 fiscal events as an example. The fund’s message was that policy choices made during periods of stress can have immediate consequences for market access and the cost of funding, especially when investors are already demanding higher compensation for risk.