Global debt to hit post-World War II levels by 2029, IMF says; warns of rising fiscal strain amid West Asia war

Global public debt is on track to cross 100% of GDP by 2029, returning to levels last seen in the aftermath of World War II, as successive economic shocks continue to strain government finances worldwide amid the intensifying West Asia conflict.

The warning from IMF Managing Director Kristalina Georgieva comes at a time when the war has begun to unsettle energy markets and trade flows, adding fresh pressure on already stretched public finances.

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Unlike the COVID-19 crisis, which delivered a sharp but singular shock, the current phase is marked by the cumulative impact of repeated disruptions, from pandemic aftereffects to geopolitical tensions and now conflict-driven supply risks, pushing debt levels into increasingly fragile territory.

The strain, she said, is deeper and more persistent, leaving governments with far less room to respond.

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Georgieva cautioned that policymakers are now walking a tightrope: maintaining fiscal credibility while continuing to shield the most vulnerable.

She pointed to emerging supply shortages in Asia, including oil, gas, naphtha and helium, as early signs of stress, warning that disruptions linked to the West Asia conflict could ripple across economies far beyond the region.

Central banks face credibility test

For central banks, the response will need to be carefully calibrated.

Georgieva said those with strong credibility should keep their focus on price stability but avoid rushing into policy moves, especially if there is a possibility of the conflict easing. At the same time, central banks with weaker credibility may need to act more decisively and communicate more clearly to anchor market expectations.

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Even in the event of a swift de-escalation, supply chains are unlikely to normalise quickly. Shipping routes remain slow-moving and energy supply adjustments, from rerouting flows to bringing new sources online, could take over a year.

This means the effects of the conflict may linger, with shortages potentially worsening before they improve.

In response, governments are being encouraged to actively manage demand, including promoting energy conservation through measures such as expanded public transport, remote work and shifts toward less energy-intensive activities.

Georgieva added that the IMF is preparing for increased demand for financial support, estimating requirements in the range of $20–50 billion. In the near term, a resilient domestic economy will be the strongest buffer, while over the longer run, rebuilding fiscal space will be critical once the current wave of shocks subsides.