The International Monetary Fund (IMF) has warned that rising geopolitical tensions and structural demographic pressures are pushing global public finances toward a more fragile outlook, with government debt on track to exceed 100% of global GDP by 2029.
In its latest Fiscal Monitor, the IMF said global public debt rose to nearly 94% of GDP in 2025 and has shown no meaningful improvement, despite earlier expectations of stabilization. The Fund cautioned that recent conflict-related spending pressures, including the war involving Iran, are contributing to a renewed surge in fiscal strain across major economies.
According to the report, the United States, China, and Japan remain the largest contributors to rising debt levels due to persistent fiscal deficits. The IMF highlighted that the United States is running a general government deficit of around 7% to 8% of GDP, even as its economy operates near full capacity, warning that no credible long-term consolidation plan has yet been implemented.
The Fund noted that higher interest rates, combined with the end of large-scale central bank bond-buying programs, have significantly increased the cost of borrowing for governments. As a result, a growing share of public revenue is being directed toward interest payments, reducing fiscal space for essential services such as healthcare, education, and pensions.
The IMF also pointed to Europe’s expanding defense spending and the use of fiscal flexibility clauses as additional factors adding pressure to already strained budgets. It warned that such measures are intensifying trade-offs between security priorities and long-term social spending commitments.
Demographic change remains another central concern. The IMF said aging populations are driving structural increases in pension and healthcare expenditures, particularly in advanced economies. It urged governments to implement durable fiscal reforms, including pension adjustments and healthcare cost containment, to ensure long-term sustainability.
The report stressed that “aspirational commitments” to fiscal discipline are no longer sufficient for countries with high debt burdens. Instead, the IMF called for concrete and credible medium-term consolidation strategies to prevent further deterioration in debt dynamics.
While financial markets have so far remained stable, the IMF cautioned that growing reliance on short-term and more volatile investors increases vulnerability to sudden shifts in sentiment.
The Fund concluded that without coordinated policy action, global debt trajectories could become increasingly difficult to manage, especially if geopolitical risks and defense-related spending continue to rise.
