The International Monetary Fund called on governments to move quickly to address financial imbalances and contain rising debt, warning that relying on economic growth alone will not be sufficient to ensure the sustainability of public finances, at a time when high energy costs and a decline in development aid threaten to widen the gap between advanced and developing economies.
The Fund's Director General, Kristalina Georgieva, said on Wednesday that policymakers must carry out "urgent reforms in public finances before the cracks widen," calling for enhancing revenues, rationalizing spending, and improving public financial management, in light of rising bond yields and increasing pressure on governments to manage their growing debt burdens.
Georgieva added, during a press conference on the sidelines of the annual meetings of the International Monetary Fund and the World Bank in Bangkok, that the global economy still shows resilience in the face of recurring shocks and uncertainty, but this flexibility “is reaching its maximum limits,” warning of growing global economic imbalances.
Regarding the American economy, Georgieva said that the United States cannot rely on growth alone to get out of the escalating public debt crisis, noting that the debt has exceeded $40 trillion, and that reducing it to a more sustainable path requires taking additional financial measures.
She explained that the US authorities are relying heavily on strong growth to reduce debt, but growth, despite its importance, will not achieve the required adjustments quickly enough, which requires additional financial measures.
Regarding global imbalances, Georgieva summarized the required adjustments among the major economies by saying that China needs to increase spending, the United States needs to boost saving, and Europe needs to increase investment.
She also warned that rapid economic developments, coupled with rapid progress in artificial intelligence, may widen the gap between developed and developing economies, especially with the sharp decline in development aid and rising energy costs.
In this context, the Fund called on member states to fulfill their financing pledges to the “Poverty Reduction and Growth Fund,” which provides low-interest or interest-free loans to low-income countries, as well as to refinance the “Disaster Containment and Debt Relief Fund,” which provides grants to reduce or cancel debt service for the poorest and most vulnerable countries.
In the “World Economic Outlook” report issued on Tuesday, the Fund raised its forecast for global economic growth in 2026 by 0.1 percentage point to 3.1 percent, but it warned of the uneven benefit of economies from the new activity generated by investment in artificial intelligence, at a time when the poorest countries are facing a rise in energy costs.
On the other hand, the Fund did not call on Britain to accelerate the pace of adjusting its financial conditions. The Director of the Fund's Public Finance Department, Rodrigo Valdes, said that the recommendation submitted to London is to continue the current path, and not to accelerate deficit reduction, in reference to the difference in financial treatment according to the circumstances of each economy.
The British government aims to balance daily non-investment spending with tax revenues by the 2029-2030 financial year, but faces additional pressures resulting from rising debt service costs, defense spending, energy subsidies and social care.
