When Public Debts Become Public Threats

A report from the International Monetary Fund (IMF) shows that global public debt is surging once again, surpassing levels seen during the pandemic. The IMF states that rising trade tensions, especially coming from America’s tariff policies, are driving up economic costs worldwide. Public debt in 2025 is projected to reach 95.1% of global GDP and could hit 100% by 2030 if no serious measures are taken. These risks include rising interest costs, tighter government budgets, and ongoing global policy uncertainty, all of which are forcing many countries to increase borrowing to keep their economies afloat.

TARIFFS, SLOW GROWTH, AND FISCAL STRAIN

The IMF’s attributes this resurgence in debt to a combination of factors: steep new US tariffs and retaliatory measures from other nations, sluggish global growth (~2.8% in 2025), and increasing trade uncertainty. These forces are squeezing government budgets, making it harder to manage rising defense and social spending alongside mounting debt service costs (payments related to repaying debt). The reason why this is important is that debt is not just a fiscal burden for governments but also a barrier to long-term national growth, especially in developing countries. When the public sector has to allocate large portions of its budgets to debt repayments and interest rather than investing in public services, namely education, healthcare, and infrastructure, it deepens the development divide. The gap continues to widen between countries with low debt levels and those trapped in cycles of high debt and low resilience, which happen to comprise mainly of developing countries.

POLICY RESPONSES MATTER MORE THAN EVER

While tariff hikes may be beyond the direct control of many of the world governments, building fiscal resilience is not. The IMF recommends countries adopt gradual yet credible fiscal consolidation plans to manage debt sustainably. These schemes include allowing automatic stabilizers, such as unemployment benefits, to function without obstruction during downturns, and ensuring that any new spending is matched with spending cuts or new sources of revenue. These actions are crucial for restoring confidence, maintaining access to capital markets, and protecting long-term economic health.

Global debt is not inherently dangerous, but it is if unmanaged. As fiscal pressures and global uncertainties rise, governments must look beyond short-term fixes and focus on sustainable, disciplined policy. The decisions made today on spending and borrowing will shape future economic resilience. With credible action and long-term thinking, nations can restore stability and protect their citizens’ well-being.

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