The head of the International Monetary Fund has called on heavily indebted governments to cut spending and urged central banks to hold a hawkish line on interest rates, as global public debt closes in on levels not seen since the aftermath of the Second World War.

Kristalina Georgieva delivered the warning in Singapore on Wednesday, speaking ahead of the IMF and World Bank annual meetings in Bangkok next week. She argued that policymakers can no longer lean on stronger growth alone to keep borrowing under control, and that credible medium-term plans to reduce deficits are now essential. As reported by Euronews, Georgieva singled out advanced economies as the worst offenders on fiscal overreach, noting that decisive action is absent precisely where the need is greatest.

Global public debt is approaching 100 per cent of GDP and could breach that threshold before 2030. Borrowing costs are already rising, with ten-year government bond yields in the United States, Germany, and Japan sitting at their highest levels since 2007, 2009, and 1996 respectively. Georgieva described recent rate increases by the Federal Reserve, the European Central Bank, and the Bank of Japan as appropriate, and indicated that a prudently hawkish monetary stance is now warranted across much of the world.

The broader backdrop is pulling in two directions. Oil prices are holding around 100 dollars a barrel, well above the 89-dollar assumption the IMF used in its July forecasts, which projected global growth at 3 per cent this year and 3.4 per cent in 2027. That gap reflects the energy supply disruption from the conflict involving Iran, a pressure the IMF chief warned is likely to persist even if hostilities end soon.

Artificial intelligence sits on the other side of the ledger. The IMF estimates that a well-managed AI transition could add up to half a percentage point to annual global growth, equivalent over a decade to inserting an economy the size of the ASEAN bloc into the world system. But Georgieva cautioned that the current AI investment surge is inflationary, likely outstripping historical waves in railways, power grids, and telecoms relative to the size of the economy. A sharp investor disappointment, she warned, could send a far-reaching shock through financial markets. Risks cited range from job displacement and cyberattacks to advanced models that could escape meaningful human oversight.