IMF  issues stark warning on global debt levels as interest payments soar

IMF issues stark warning on global debt levels as interest payments soar

Washington, D.C., USA/London-UK, November 28, 2025

IMF warns Global Public Debt is on Track to Exceed 100% of GDP by 2029, with Interest Payments Outstripping Health and Education Spending in 46 Developing Nations

The global economy is sailing into a period of extreme fiscal stress, as the International Monetary Fund (IMF) Issues Stark Warning on Global Debt Levels as Interest Payments Soar, threatening to destabilise developing nations and constrain the growth of major economies. 

In its recent October 2025 Fiscal Monitor and September Global Debt Monitor reports, the IMF delivered a sobering assessment: 

global public debt is projected to exceed 100 per cent of global GDP by 2029. Such a ratio would push government borrowing to its highest sustained level since the immediate post-World War II rebuilding era in 1948, marking a profound structural shift away from the historically stable debt environment of the pre-pandemic years.

The core of the crisis lies not just in the volume of debt, which remains near historic highs at over 235 per cent of global GDP (when private and public liabilities are combined), but in the cost of servicing it. The environment of persistently higher interest rates, enforced globally by central banks to tame inflation, has dramatically increased the burden of debt refinancing. 

The IMF highlights that the period of “unusually easy conditions,” where rising debt was offset by falling interest rates, has decisively ended. This new high-cost environment is the single biggest threat to fiscal resilience.

The Developing World’s Crushing Trade-Off

The impact of Soaring Interest Payments is most severe in the developing world, where the consequences are translating directly into humanitarian and development crises. 

The IMF and UN Trade and Development (UNCTAD) data show that developing countries’ net interest payments on public debt hit a staggering $921 billion in 2024, a 10 per cent increase from the previous year.

The fiscal toll is crushing sovereign budgets, forcing impossible choices on governments. Sixty-one developing countries are now allocating 10 per cent or more of their entire government revenue to simply pay interest to creditors, severely limiting resources for critical public services. 

Most strikingly, in 46 developing countries, governments are spending more money on net interest payments than they are on either health or education. 

This direct trade-off between debt servicing and human capital investment threatens to reverse decades of progress in poverty reduction and development. For these nations, the IMF warns that the problem is not one of liquidity but one of long-term solvency, putting the global financial system’s stability at increasing risk.

Advanced Economies: The Drivers of Fiscal Strain

While the developing world bears the harshest social cost, advanced economies (AEs) are the primary drivers of the growing global public debt burden. 

The persistently high global fiscal deficit, averaging around 5 per cent of global GDP, is a key accelerant. 

This deficit is driven by several factors:

Legacy COVID Costs: 

Unwinding the huge subsidies and social benefits introduced during the pandemic.

Geopolitical Pressures: 

Increasing global defence and security spending due to geopolitical tensions.

Fiscal Drag: 

The widening interest rate-growth differential (r-g), where the cost of borrowing (r) exceeds the rate of economic growth (g), leading debt to accumulate automatically without any new government spending.

The IMF specifically highlights fiscal trends in major G20 nations. Public debt ratios are projected to continue deteriorating significantly in the United States, France, and Belgium, driven by sustained high deficits and the high cost of servicing their massive debt loads. 

The sheer scale of borrowing in the US and China, in particular, heavily influences global bond markets, pushing up borrowing costs for every other country. Conversely, large emerging markets like China are seeing a surge in private, non-financial corporate debt, creating concentrated risks in sectors like property and industry, even as China’s public debt levels remain comparatively lower than those in the US.

The message from Washington, D.C. is a global plea for urgent fiscal consolidation. The IMF is calling on governments to implement credible, gradual, medium-term fiscal adjustment plans to rebuild buffers against future shocks. 

For the London-UK based CJ Global, the warning is clear: 

until major economies demonstrate the political will to reduce their deficits, the world will remain trapped in a self-reinforcing cycle where high public debt drives high interest rates, which in turn cripple the growth prospects of nations and force billions of people to choose between basic public services and paying creditors. 

This structure creates fragility that is only one shock away from triggering the next major global financial crisis.

Headline Points

Debt Historical Peak: 

The IMF projects that Global Public Debt will exceed 100% of global GDP by 2029, a level not seen since 1948, indicating the new severity of fiscal strain.

Interest Payments Soar: 

Developing countries’ net interest payments hit $921 billion in 2024, leading 61 nations to spend over 10% of government revenue on debt servicing alone.

Health vs. Debt: 

In 46 developing countries, the government spends more on interest payments than it does on combined health and education budgets, demonstrating a profound social cost.

Drivers of Strain: 

Debt is driven by persistently high fiscal deficits in advanced economies (e.g., US, France) and the increasing cost of borrowing (interest rate-growth differential).

Call for Action: 

The IMF urges governments to implement credible fiscal adjustments immediately to avoid crowding out private investment and to build resilience against inevitable future economic shocks.