Rising government borrowing costs are intensifying fiscal pressures worldwide, the International Monetary Fund warned on Wednesday, urging credible measures to contain deficits as global public debt heads above 100% of economic output by 2030.
In a blog post, the IMF said average 10-year government bond yields across the Group of Seven economies rose by more than 1 percentage point between February and September, reaching their highest level in nearly two decades.
The fund cited the oil price shock, persistent inflation, stronger investment demand and expectations of growth linked to artificial intelligence among the drivers.
High debt, spending pressures and expectations of large government bond issuance are also pushing yields higher, with borrowing costs in major economies potentially worsening debt dynamics elsewhere.
The effective average interest cost of government financing is projected to rise from 2.3% in 2021 to 3.7% by 2031.
US interest payments are forecast to increase from about 2.8% of GDP before the pandemic to 5.7% in 2031, roughly matching projected Social Security spending.
In low-income countries, interest payments already consume more than 15% of tax revenues.
Rising debt-servicing costs leave less room for investment and social spending while limiting governments’ ability to respond to downturns.
The global primary deficit, which excludes interest payments, is expected to reach about 3.3% of GDP in 2026. Stabilizing the debt ratio would require reducing it to around 2.6%.
Shorter debt maturities are accelerating the transmission of higher policy rates to government financing costs.
The IMF urged advanced economies to adopt credible fiscal plans and emerging markets to strengthen debt management, warning that delayed action would require larger adjustments.