Rising Debt Continues to Induce Public Uncertainty, Fiscal Policy Must Change

By: Peter Ort, The Quinnipiac University Global Economics Research Team

Photo by: Markus Spiske on Unsplash

On April 23, 2025, a recent IMF blog post titled Rising Global Debt Requires Countries to Put Their Fiscal House in Order highlights not only the importance but also the urgency of fiscal policy in the context of debt accumulation. The main point of this piece is that global debt-to-GDP levels are rising faster than originally anticipated, and this poses many unique economic challenges for the coming years.

While World Economic Outlook projections from 2019 suggested that global public debt would equate to 86% of global GDP by 2024, it instead rose to 95% in 2024, with projections now suggesting that we could easily surpass 100% of global GDP by 2027. This level of debt-to-GDP has not been reached since World War II and is most alarming since we are reaching this level during relative peacetime.

Geopolitical skirmishes and conflicts are argued to be responsible for the global increase in defense spending, which leads to a lack of investment in developing countries and contributes to overall uncertainty among people and markets. It works like a vicious cycle: people become uncertain about the market due to massive spending and debt accumulation, and governments continue to increase spending to try to mitigate uncertainty within their populations. But that leads to more debt and perpetuates the cycle.

According to the authors, in order for governments to stop the bleeding and reduce debt, habits need to change. Many advanced economies are numb to deficits and have historically been late to facing economic problems. Alternatively, the IMF suggests that after reducing debt and running a surplus, advanced economies should widen buffers to address future economic shocks. Some recommendations include building fiscal support for dislocated businesses and communities, as well as advancing pension and healthcare reforms. Adjusting fiscal policy in developing countries is even more essential, as a lack of debt restructuring and/or a functioning tax system could be the difference between advancement and stagnation. Any new spending must be offset by either new revenue or spending cuts.

For more information, you can read “Rising Global Debt Requires Countries to Put their Fiscal House in Order.”