REUTERS/Mariana Bazo
- Global government borrowing is set to hit $100 trillion this year, the International Monetary Fund said.
- It pointed to political uncertainty, aversion to tax hikes, and spending pressures as key drivers.
- In a report, it warned mushrooming public debt raises the chances of a "broader financial crisis."
Global public debt is on track to surpass $100 trillion this year for the first time — and the increase threatens a wider financial crisis, the International Monetary Fund warned.
In a report published Tuesday, IMF researchers said total government borrowing was set to reach 93% of worldwide GDP this year and could hit 100% by 2030, with the US and China driving the increase.
Mushrooming public debts "raise the probability of debt distress or broader financial crisis," the authors noted, adding that the interest payments eat into government budgets, reduce spending flexibility and hinder their ability to respond to economic downturns.
The IMF also warned of a "severely adverse scenario," in which global debt could balloon to 115% of global GDP by 2026 because of "weaker growth, tighter financing conditions, fiscal slippages, and greater economic and policy uncertainty."
"Countries are increasingly vulnerable to global factors affecting their borrowing costs, including spillovers from greater policy uncertainty in systematically important countries, such as the United States," the authors wrote in a blog accompanying the report.
The report's authors projected that around two-thirds of countries would stabilize or reduce their debts in the coming years, but added there were "good reasons" future debt could be higher than projected.
Those include a broader political embrace of increased government spending, stiffer resistance from lawmakers to higher taxes, and pressure to spend on priorities such as the clean-energy transition, aging populations, and national security.
America's national debt has more than tripled in under 25 years, ballooning from $10.3 trillion in 2000 to a record $35.7 trillion, according to the US Treasury website.
It has grown by more than $7 trillion since 2019, reflecting the US government's aggressive spending during the COVID-19 pandemic and more recent outlays such as military support for Israel and Ukraine, which together have cost it well over $100 billion.
The debt looks set to grow further with both presidential candidates, Kamala Harris and Donald Trump, pledging to spend big if they enter the White House.
Harris proposed offering down-payment assistance for first-time homebuyers, and expanding the child tax credit and capping childcare costs to help young parents.
Trump has suggested eliminating taxes on tips, overtime pay, and Social Security while also extending many of the tax cuts he made as president in 2017.