Global public debt is elevated and projected to exceed $100 trillion in 2024, equivalent to 93 per cent of GDP and might well surpass 100 per cent of GDP by 2030, according to the International Monetary Fund (IMF).
“After a decline in 2021−22, global public debt edged up again in 2023 and is projected to approach 100 per cent of GDP by 2030, with the world’s two largest economies, China and the United States, largely driving the increase,” it stated in its October 2024 Fiscal Monitor report.
For Nigeria, data from the latest quarterly statistical bulletin of the Central Bank of Nigeria (CBN) stood at 74.3 per cent (N1.31 trillion) of total retained revenue of N1.76 trillion in Q1 of 2024.
According to the Debt Management Office, the total debt owed by both the federal and state governments rose to over N121 trillion as of March 2024. This is a 19.8 per cent and N24 trillion increase within three months from the N97 trillion debt profile as of December 2023.
The total debt was made up of external debt at $42 billion (N56 trillion) and domestic debt at N65 trillion ($49 billion).
The IMF report shows that future global debt levels could be even higher than projected, and much larger fiscal adjustments than currently projected are required to stabilize or reduce it with a high probability.
It argues that countries should confront debt risks now with carefully designed fiscal policies that protect growth and vulnerable households while taking advantage of the monetary policy easing cycle.
It said that the fiscal outlook of many countries might be worse than expected for three reasons: large spending pressures, optimism bias of debt projections, and sizable unidentified debt.
“Fiscal policy uncertainty has increased further, mounting spending pressures such as the green transition, defense, costly industrial policies, population aging, and UN Sustainable Development Goals, not fully accounted for in current debt projections are likely to lead to a further buildup of public debt. ,” it stated.
Secondly, it stated that debt projections are subject to an optimism bias.
“Experience shows that they tend to systematically underestimate debt levels: realized debt-to-GDP ratios three years ahead are higher than projected by 6 percentage points of GDP, on average.”
Unidentified debt, that is the change in government debt that is not explained by budgetary deficits, interest-growth differentials, and exchange rate movements—is large and often a key driver of bulging debt the report mentioned.
IMF stated that a judicious mix of people– and growth-focused fiscal measures are needed and will vary across countries.
“Emerging markets and developing economies have greater potential to mobilize tax revenues—by broadening tax bases and enhancing revenue administration capacity—while strengthening social safety nets and safeguarding public investment to support long-term growth,” it said.
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