IMF Warns: Public Debt Consumes Global GDP

IMF Managing Director Kristalina Georgieva warned of escalating risks facing the global economy, with public debt rising to approximately 100% of GDP, surpassing its highest levels since the end of World War II. Georgieva said that global growth forecasts for 2026 have improved to around 3%, but widening global imbalances and setbacks in the disinflation trajectory in several countries are adding new pressures, alongside rising bond yields due to financial challenges. She also warned that the continued closure of the Strait of Hormuz keeps the risk of a shock in energy markets high, which could further strain the global economy. This comes as global bond yields hit their highest levels in nearly two decades, with inflationary fears mounting due to rising oil prices and growing investor bets that central banks, led by the US Federal Reserve, will continue to tighten monetary policy. Bond prices fell in Japan and Australia on Tuesday, pushing the yield on Japan’s 10-year government bonds to 3% for the first time since 1996. This followed a wave of selling in US Treasury bonds that drove 10-year yields to their highest levels since January of last year. Meanwhile, the Bloomberg Global Sovereign Bond Index rose to 3.72% on Tuesday, its highest level since mid-2008, marking its fourth consecutive session of gains.