Finance21 September, 20262 min read
IMF Managing Director Kristalina Georgieva Tells UK And US To Cut Debt As Borrowing Costs Rise
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IMF urges advanced economies to cut borrowing and lower debt amid rising borrowing costs. Global public debt projected above 100% of GDP by 2029, driven by rising US and China debt.
5 outlets told this the same way.
IMF urges debt cuts
IMF Managing Director Kristalina Georgieva told advanced economies to cut borrowing and reduce debt levels as government interest costs surged, warning that governments had taken "no action to contain that service cost." Georgieva said the IMF message was that governments had command over domestic policies, even as global economic shocks were "pushing debt levels up like a staircase not to heaven." Georgieva tied the rise in borrowing costs to wars disrupting the supply of oil, which fueled inflation, and she said higher global borrowing costs have hit the UK government ahead of UK Prime Minister Andy Burnham's first Budget next month.
Georgieva said the latest figures showed borrowing of £18.3bn ($24.4bn) in August, and she added that debt interest for the month was the highest August figure since monthly records began in 1997. Georgieva also warned that the US debt pile had surpassed $40tn and said it had doubled within the space of a decade, prompting concerns at home and abroad.
Fiscal consolidation and rates
Georgieva said the IMF urged governments to narrow budget deficits and rein in global debt, and she warned that fiscal consolidation must take place while action remained insufficient. At the Qatar Economic Forum in New York, Georgieva said, "We have been warning that fiscal consolidation must take place, and we are seeing a lot of understanding, but not enough action," while speaking about record global debt. Georgieva said global public debt is projected to rise above 100% of GDP by 2029, two years earlier than previously anticipated, driven mainly by a surge in the U.S. and China.
Georgieva said inflation remains "stubborn" and that it "may be necessary" for central banks to follow the United States Federal Reserve and European Central Bank in raising interest rates. Georgieva warned that higher borrowing costs would make it more difficult to service debt, linking the debt outlook to the cost of rolling over government borrowing.
Energy shocks, AI risk
Georgieva said the IMF saw the global economy affected by two forces "pushing in opposite directions," the energy price shock and investment in AI. Georgieva said it was important for low exports of oil and gas from the Gulf "to resume in a durable manner" so the energy supply shock could be in the rearview mirror, calling it "a very significant step to normalisation." Georgieva warned that if AI systems took "[on a] life of its own," governments could face a significant financial stability risk.
Georgieva said disruptions to energy and transportation were taking a toll on commodity producers such as Qatar, Kuwait and Iraq, and she said this made "sharp contractions" in their economies likely. Georgieva said Qatar built buffers that were "protecting the economy today," and she said the IMF sees Qatar's economy shrinking by 8.6 per cent in 2026.