When it comes to public debt, the world’s approach seems to be “buy now, panic later.” Following the economic shock of COVID-19, government debt climbed rapidly as nations boosted stimulus spending to drive recovery. The IMF now warns that by year’s end, global public debt could surpass $100T — and may reach a 100% debt-to-GDP ratio by the decade’s close.

• Currently, public debt to GDP exceeds pre-pandemic levels by 10 percentage points — in the worst-case scenario, it could rise to 115% in three years — ~20 points above current projections.
• Countries holding over half of global debt and around two-thirds of world GDP are on unsustainable borrowing paths, with the US and China racing towards higher-than-ever debt levels.

Time to bail out the boat: The IMF has urged nations to confront debt risks head-on, recommending a budget adjustment of 3% to 4.5% of GDP worldwide. This could mean tax hikes or spending cuts — a bitter pill for many economies to swallow. However, with aging populations, climate change costs, and security concerns on the horizon, the waters ahead look choppy for many global economies trying to stay afloat in this sea of debt.