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The International Monetary Fund warned that rising bond yields and elevated public debt are intensifying pressure on government finances, in a blog post accompanying its Fiscal Monitor report. The Fund said higher borrowing costs make credible fiscal consolidation more urgent.

According to the post, long-term government bond yields in major advanced economies have climbed sharply. Average 10-year yields across G7 countries rose by more than one percentage point between February and September, reaching their highest level in about 20 years. Global public debt is expected to exceed 100 percent of world GDP by 2030, a threshold last seen just after the Second World War. The IMF linked the increases to oil price shocks, persistent inflation, strong investment demand and growth expectations tied to artificial intelligence spending.

The Fund projected that the average government cost of borrowing will rise from 2.3 percent in 2021 to 3.7 percent by 2031, leaving fewer resources for public investment and social spending. It urged heavily indebted advanced economies to adopt credible medium-term plans based on realistic assumptions, while developing countries should reduce vulnerabilities and low-income nations strengthen tax systems and spending efficiency. Postponing adjustment, the IMF said, would deepen fiscal fragilities and make debt stabilization harder.

Key Takeaways

• G7 10-year government bond yields rose by more than one percentage point between February and September, their highest in about 20 years
• Global public debt is projected to exceed 100 percent of world GDP by 2030
• Average government borrowing costs are expected to climb from 2.3 percent in 2021 to 3.7 percent by 2031