The global effort to curb Covid infections and to tame inflation has intertwined the budgets of many nations. Recovery is slow, and governments face higher interest costs on debt as they push public spending, including salaries and pensions, to keep up with rising prices. This background stands behind IMF projections that 2023 will see a small rise in borrowing needs, averaging about 5 percent of GDP for many governments as they absorb the costs of stimulus and social programs while trying to avoid overheating economies.
The IMF’s latest Financial Monitoring update, released during its spring meetings, confirms that public debt levels will stay high worldwide. After a sharp rise to about 100 percent of GDP caused by COVID-19 policy responses in 2020, the debt ratio has eased to roughly 92 percent in the following years. Look ahead, however, and the fund expects the debt burden to climb back toward the 100 percent mark in the coming years, with debt service consuming a larger slice of fiscal room.
The IMF warns that the United States, China, and other large economies must act decisively to keep debt from reaching near‑record highs in five years. The report stresses that public debt will not only surpass pre‑pandemic projections but will also rise more quickly than before the crisis, according to Victor Gaspar, the IMF’s Director of the Global Financial Affairs Office.
In the IMF analysis, the United States and China account for most of the expected global debt growth. The debt-to-GDP ratio in the United States is projected to rise from about 121.7 percent in 2022 to roughly 136.2 percent by 2028. China’s debt ratio is forecast to climb from around 77.1 percent in 2022 to about 104.9 percent in 2028, driven by higher spending and a slower recovery than previously anticipated. For the euro area, the burden is expected to ease somewhat, with the debt-to-GDP ratio sliding from about 90.9 percent in 2022 to 85.4 percent in 2028.
Spain’s Debt Outlook Remains Elevated
Spain is highlighted as an example of the broader trend. The IMF projects that Spain’s debt ratio, which peaked at about 120.4 percent of GDP in 2020 and eased to around 112 percent in 2022, will stay high at about 109.3 percent in 2028. The persistence of high debt levels raises questions about long‑term fiscal flexibility and the ability to respond to future shocks.
The key issue tied to elevated debt is the effect of interest payments on the room available for policy choices. In Spain, the IMF’s scenario shows a deficit remaining around 4.5 percent of GDP in 2023, with a projected dip to roughly 3.5 percent in 2024. By 2026 through 2028, deficits are expected to hover near 4 percent. Even without the interest burden, the underlying primary balance would face strain, with the plan showing a neutral or slightly positive stance not fully realized in the final outcome of those years.
Across regions, the message is consistent: debt remains a central constraint on fiscal maneuvering. Governments will need to balance stimulus and social spending with sustainable debt paths, all while preparing for potential future crises. The IMF’s ongoing monitoring emphasizes prudent debt management, credible fiscal rules, and flexible policy tools to respond to evolving economic risks.