IMF warns of rising debt costs as global borrowing nears 100% of GDP
The IMF says global public debt is approaching 100% of world output and US Treasury yields have hit their highest since 2002. For poorer economies, carrying debt is getting dearer.
The head of the International Monetary Fund used a Bangkok press conference on 14 October 2026 to point at the richest countries as well as the poorest. Kristalina Georgieva, the first IMF chief from a developing country, said advanced economies such as the US were the "worst offenders" in failing to rebuild fiscal buffers after the pandemic. Many developing countries, she said, had strengthened their institutions in that time.
For readers in Kathmandu the question is how this reaches Nepal, an economy that imports fuel and food and relies on workers abroad. The IMF's findings below are global. The reading for Nepal is our own analysis, not the Fund's view of the country.
A darker forecast
The Fund sees significant threats to growth and financial stability if the AI investment boom ends, debt keeps building or the Middle East conflict drags on. It forecasts global growth of 3.1% for 2026, and nearly all developing economies are expected to expand more slowly.
Georgieva said current developments and the rapid advance of AI could widen the gulf between rich and developing economies, as development assistance falls steeply. Higher fuel and food costs and a weaker appetite for riskier investments add to the pressure.
For an importer of fuel and food, costlier energy is likely to lift the import bill and inflation. Thinner appetite for emerging-market risk could raise the cost of borrowing abroad.
The price of money
Bond yields in advanced economies have risen by an average of about 110 basis points since late February 2026. Speaking in Bangkok on 14 October 2026, Era Dabla-Norris, deputy director of the IMF's Fiscal Affairs Department, said yields on US 10-year and 30-year Treasuries had hit their highest since 2002 on 13 October 2026. Other Group of Seven economies, she said, showed similar trends. She tied the rise to higher energy prices and inflation expectations linked to the war in Iran.
Global public debt stands at its highest since World War II and is approaching 100% of global GDP, the Fund said. Governments are paying more to carry it.
Source: IMF study released on 14 October 2026
The IMF projects that global government interest payments will rise from 2.3% of GDP in 2021 to 3.7% by 2031. In the US the climb is steeper: from 2.8% of GDP before the pandemic to 5.7% by 2031. Low-income countries already devote an average of 15% of tax revenue to interest.
Why should a remittance economy care about American interest bills? One reading is competition for savings: when Treasuries pay more, money may drift away from riskier markets. Dabla-Norris warned that rising yields in advanced economies could tighten global financial conditions and affect emerging markets.
The squeeze on poorer states
Georgieva put a number on the burden. Average debt service costs have risen to 14% of revenue from 6% a decade earlier, even as overall debt burdens have eased. On that evidence, these countries are not necessarily borrowing more. They are paying more for what they already owe.
Nigerian Finance Minister Taiwo Oyedele, who chairs the Group of 24 developing nations, said on 13 October 2026 that developing countries were paying $500bn more for their debt than developed ones, despite wider budget deficits.
The IMF's response is to ask members for money. Georgieva urged them to honour pledges to the Poverty Reduction and Growth Trust (PRGT), the Fund's source of low- and zero-interest loans for low-income countries, which has been restructured to triple its lending. The IMF also wants the Catastrophe Containment and Relief Trust (CCRT) replenished. That fund provides grants for debt-service relief to the poorest and most vulnerable members, and Georgieva said it urgently needs more money because it has been used frequently. She gave no details on missed or delayed pledges.
Aid is falling and borrowing is getting dearer, which in our analysis narrows the options of any small economy.
What to watch
- Whether yields on US 10-year and 30-year Treasuries stay elevated, and whether other G7 yields follow.
- Whether members honour their pledges to the PRGT and replenish the CCRT.
- Any sign that the AI investment boom is ending, which the IMF names as a risk to growth and financial stability.
- Fuel and food prices, which Georgieva identified as pressure points for poorer economies.
- Senegal's debt restructuring under the Group of 20 Common Framework. The IMF has reached staff-level agreement on a $2.2bn lending programme, and Georgieva expects the process to move quickly.
How this story was made: researched and written by The Standard’s desk with AI assistance, from the published reporting and official data credited below, and checked against those sources. Our standards.
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