Source: International Monetary Fund

April 23, 2025

Speakers:

Vitor Gaspar, Director, Fiscal Affairs Department
Era Dabla‑Norris, Deputy Director, Fiscal Affairs Department
Davide Furceri, Division Chief, Fiscal Affairs Department

Moderator: Tatiana Mossot, Moderator, Senior Communications Officer

The Moderator: Good morning, good afternoon, and good evening for our viewers around the world. I am Tatiana Mossot with the IMF Communications Department, and I will be your host for today’s press briefing on the Spring Meetings 2025 Fiscal Monitor named “Fiscal Policy Under Uncertainty.” I am pleased to introduce the Director of the IMF Fiscal Affairs Department, Vitor Gaspar. He is joined by Era Dabla‑Norris, Deputy Director of the Fiscal Affairs Department, and Davide Furceri, Division Chief of the Fiscal Affairs Department. Good morning, Vitor, Era, and Davide.

Before taking your questions, let me start our briefing by turning to Vitor for his opening remarks. Vitor, the floor is yours.

Mr. Vitor Gaspar: Good morning. Many thanks for your kind introduction. Thank you all for your interest in the Fiscal Monitor, covering fiscal policies around the world. Since the last Fiscal Monitor in October 2024, global economic prospects have significantly deteriorated and risks to the economic outlook are elevated and tilted to the downside. Uncertainty is very high, and confidence has been weakening. Financial markets have partially corrected, and financing conditions have tightened.

Global public debt is very high and rising. According to the WEO reference projection in 2025, it will rise above 95 percent of GDP. It is higher and growing faster than pre‑pandemic. It will be approaching 100 percent of GDP by the end of the decade, surpassing the pandemic peak, but global numbers hide a wide diversity across countries. In the figure, every bubble represents a country. The larger the bubble, the larger the country’s GDP. The figure shows debt levels on the vertical axis and debt growth on the horizontal axis compared to pre‑pandemic. The higher the bubble in the figure, the more debt has increased compared to 2019.

119 countries are above the horizontal axis. For these countries, public debt is higher than pre‑pandemic. The further to the right in the figure, the faster debt grows compared to pre‑pandemic trends. Bubbles as you can see are all over the chart. That illustrates a wide diversity across countries. Therefore, fiscal policies must vary in line with country‑specific factors and circumstances, but in the face of turbulent and threatening times ahead, resilience is needed everywhere. Countries should redouble efforts to keep their own fiscal house in order.

Let us zoom in on the top, the right top quadrant. Countries in the quadrant have public debt higher and rising faster. This group includes 59 countries. That is about one third of the 175 countries in the chart. But their economies represent 80 percent of world GDP. Their economic weight makes them the main drivers of global trends. You can see many large bubbles in this quadrant. No surprise. Most large economies, including the largest, are there.

Now, let us focus on the remaining two thirds of countries in the world. There are 116 countries in the group that represent about 20 percent of world GDP. In the chart that you are looking at, the blue line represents all countries except for the 59 that I have mentioned before. The two lines in the chart representing the world and representing the remaining 116 countries evolve similarly up to the year of the pandemic. After 2020, as you can see, the trends diverge. The two lines actually cross in 2023. For these 116 countries, aggregate public debt is now well below pandemic levels, but going forward, it is very flat, indicating a stabilization of public debt at high levels. But the distinctive feature of the current conjuncture is uncertainty. One must go beyond referenced projections.

In the words of the Managing Director, trade policy uncertainty is off the charts. Upside risk to public debt projections dominates the outlook. The October 2024 Fiscal Monitor introduced a novel tool to quantify the distribution of debt risks around the referenced projection. We call it public debt at risk. According to this tool, global public debt three years ahead would come at 117 percent of GDP in a severe adverse scenario.

Recent developments with sharpening, increasing, and persistent uncertainty, tightening financing conditions push public debt at risk even higher. In a fast-changing and perilous world, Ministers of Finance must act urgently and decisively. They face stark tradeoffs and painful choices. Policymakers should invest their political capital in building confidence and trust. That starts with keeping their own houses in order. That is especially important in a situation that tested the resilience of individual economies, not to mention the entire system. Putting the house in order involves three policy priorities.

First, fiscal policy should be part of overall stability‑oriented macroeconomic policies. Second, fiscal policy should in most countries aim at reducing public debt and rebuilding buffers to create space to respond to spending pressures and other economic shocks through a credible medium‑term framework. Third, fiscal policy should, together with other threshold policies, aim at improving potential growth, thereby easing policy tradeoffs. In these times of high uncertainty, fiscal policy must be an anchor for confidence and stability that can contribute to a competitive economy, delivering growth and prosperity for all.

Ministers of Finance must build trust, tax fairly, spend wisely and take the long view. My colleagues and I are ready to answer any questions that you may have.

The Moderator: Thank you, Vitor. We will now open the floor to your questions, but before we do that, a couple of ground rules, please. If you want to ask a question, please raise your hand first, wait until I call you and a colleague will give you the microphone. When you ask your questions, please identify yourself and the network you are working for. And for colleagues online, please ask your questions on Webex, and we will come to you.

QUESTION: According to the report, tariffs and trade tensions have increased uncertainty and risks to economic growth. How can affected countries manage the negative impact on public confidence and growth, especially considering the high level of public debt and financial challenges they are already facing?

Mr. Vitor Gaspar: Thank you very much for your question. That allows me to summarize again the top‑level message from the Fiscal Monitor. Global public debt, as you said, is high, rising, and we always emphasize it is also risky. It rose above $100 trillion in 2024, and that was a headline six months ago. In the IMF referenced projections, that will continue rising, approaching 100 percent of GDP by the end of the decade.

But what we emphasize most at this point in time is the unusually elevated degree of uncertainty. To repeat the quote from the Managing Director, “Trade policy uncertainty is literally off the charts.” There is, therefore, a sense of urgency in policymaking. According to our public‑debt‑at‑risk tool, our estimates for three years ahead point to debt at risk at 117 percent of GDP for the world, which is a level that has not been seen in many decades.

But even that extreme adverse scenario may be under‑estimating tail risks because trade and geoeconomic uncertainty has escalated, financing conditions tightened, financial market volatility is visible from headlines, and spending pressures have intensified further. So, in those conditions, the point about countries keeping their own houses in order is crucial, and that is instrumental to deliver resilience and sustained growth from a long‑term perspective.

The Moderator: Thank you, Vitor. As you may have seen, there are two chapters, the second one is on emerging markets. And I think Era and Davide; we have some questions for you too.

QUESTION: Given the current global economic slow‑down, what are the specific challenges and impacts faced by emerging and developing countries and what policy measures can be implemented to mitigate these effects?

Ms. Era Dabla‑Norris: Let me start with what we see as some of the key sources of uncertainty that emerging market and developing economies are facing. Vitor had laid out some of the broader issues but let me highlight three. So, in addition to the fact that we see growth prospects being marked down across the board, and we see that emerging markets and developing economies could be impacted through trade, financial and commodity channels, let me highlight three specific risks. The first is escalating uncertainty about tariffs and associated policies. In the Fiscal Monitor, we find that geoeconomic uncertainty, in particular, an escalation of geoeconomic uncertainty actually can push up debt over the medium term by about 4.5 percentage points. For emerging market economies in particular, it could be as high as 6 percent of GDP.

Why is this the case? Because essentially, with higher geoeconomic uncertainty, that can dampen growth prospects, it lowers revenues because consumption production tends to fall. It also leads to higher spending, so as a result, fiscal positions deteriorate and debt increases. That is one important source of risks.

A second source of risks is more volatile financial conditions. In the U.S., for instance, or other systemically important economies can spillover into emerging market and developing economies. And it can do so by raising sovereign borrowing costs. So, our analysis in the Fiscal Monitor shows that at 100 basis point increase in U.S. nominal Treasury yields translates into 100 basis point increase in emerging market economies’ borrowing costs. And this lasts for several months.

A third source of risk is that we have seen that debt levels are high in many emerging markets and developing economies, so interest expenses are commensurately very high, and they are eating up a larger share of the budget. So, our analysis shows that 1 percentage point of GDP increase in interest expenses results in crowding out of other essential items within the budget, such as social spending and infrastructure investment. So, as Vitor pointed out, in this environment, it is very, very important for countries to put their own fiscal house in order.

What does that mean? Country specifics will vary, but what it really means is that countries need to think about putting in place a gradual fiscal adjustment within a credible medium‑term fiscal framework. For EMDEs, where tax revenues are low, they can mobilize additional revenues by expanding the tax base. They can eliminate energy subsidies and other types of subsidies that can be distortionary. They can find ways to reprioritize spending. And most importantly, they can think about the policies that are needed to boost growth because that really can help ease these fiscal tradeoffs.

QUESTION: My question is about energy subsidies and perhaps pension reforms, which are not related to emerging markets but pretty much the same problem. It is when the margin exists in many countries when you want to have some fiscal space. But in those many countries you have already social tensions that are quite high, so what are the possibilities for countries to make those reforms that are highly unpopular most of the time if they want to have this margin created?

Ms. Dabla‑Norris: Let me talk about energy subsidies and my colleague Davide can speak a little bit about pension reforms. As you correctly pointed out, countries need to reduce debt. They need to create fiscal space. And energy subsidies and pension reforms can be important reforms that countries can undertake to generate fiscal savings. So, when we look at energy subsidy reforms in particular, energy, they account for about 1.5 percent of GDP on average in emerging markets and developing economies. And reforming them can have tremendous benefits for the economy. So let me enumerate some of them.

First, it increases energy efficiency in the economy. Secondly, it generates fiscal savings that can then be used to increase other types of social spending and needed priority infrastructure investments. And finally, many of these subsidies tend to be highly regressive, so they do not necessarily benefit the poorest segment or the most vulnerable segments of society.

In our Fiscal Monitor Chapter 2, what we did is we developed a novel real‑time measure of public sentiment. This is the sentiment of households, civil society organizations, and other stakeholders to gauge how governments can leverage strategies in order to make these kinds of reforms acceptable. There are a number of things that we found that are specific to energy subsidy reforms that I would like to talk about.

The first is that we found that reforms that are—or changes that take place gradually have greater success of being implemented. To give you an example, Colombia very recently had an energy subsidy reform. They implemented it over a two‑year period, that was preannounced, so that people had time to adjust.

A second strategy that we found successful—to be successful in shaping the acceptability of these reforms is that there was timely implementation of accompanying measures. And countries that put in place accompanying measures to really protect and support the most vulnerable, countries that put in place measures up‑front and invested in social programs and social infrastructure that was very visible to the public had a greater chance of succeeding.

We also found that policies that were well‑communicated, that built consensus, that explained the tradeoffs to people had a much higher success of being accepted by the general public. For example, Morocco made it very clear that there was going to be a comprehensive communication strategy at the very beginning, at the very outset, and the message that was conveyed was that subsidies were a poor instrument for providing social support. A host of these strategies can be used by countries to implement these politically challenging reforms.

Mr. Davide Furceri: The chapter also deals with pension reforms. We know that in many countries, spending on pensions is quite high. Just to give you a couple of numbers, in the case of advanced economies, it is 8 percent of GDP; in emerging market, about four. This spending is projected to increase due to increasing life expectancy and retirement. Reforming the pension system is important to generate fiscal savings but also to sustain labor‑force participation, as well as employment.

Some of the key messages that we find in the chapter on reforms touch upon some of the issues that Era mentioned, gradual and timly of the reform. But for pension, what we find is that strategic communication and stakeholder engagement has been especially important. Indeed, there are cases of countries that have succeeded in implementing significant reform, for example, presenting an increasing retirement age as part of the reform that was trying to sustain adequate benefit levels. Or in some cases they were creating bipartisan commissions where they were engaging with stakeholders to hear their concerns and think about implementing the reform in the best way.

An important issue when we think about pension reform is strengthening financial literacy and making sure that various stakeholders will talk about the potential benefits and cost of various pension schemes. Thank you.

The Moderator: Very last one before we move to the U.S. and the other countries and regional and then we will move to other topics.

QUESTION: I still want to focus on Chapter 2 because we are talking about developing economies and public sentiment. Era, when you were talking, you talked about subsidies being discretionary, not making the budgets, you know, complete and all of that, but we also know for many developing countries and even frontier economies, they are under pressure to cut back energy subsidies to ease debt burdens, yet these same subsidies often help keep the lights on for millions of families, low‑income families and businesses. You talked about growth earlier on. So, without these low‑income businesses, how would you also get growth? How does the IMF suggest governments manage this delicate balance and enable these countries to rationalize subsidies while safeguarding energy subsidies and cushioning the most vulnerable without leaving them behind because we are torn between having to think that subsidies are really 100 percent bad, so I really wanted to comment on that.

Then on Nigeria, energy subsidy reforms that were seen have sparked protests and public frustrations, reflecting a top balance between fiscal responsibility and social equity. How do you think that Nigeria can navigate this difficult path and what specific measures can the IMF suggest ensuring that these reforms are fair, inclusive and accepted by the public. Thank you.

Ms. Era Dabla‑Norris: Let me talk in more detail about subsidies. Thank you for your question. These are challenging reforms to undertake. Why? Because they impact people’s, small firms’ pocketbooks immediately. An increase in energy prices as the government is moving towards cost recovery, pricing impacts pocketbooks immediately. This is a very tangible impact. Whereas the benefits that I spoke of, which are energy efficiency, the ability to reallocate fiscal savings take time to materialize. They are much more diffuse. Everyone benefits from those, but the pocket impact is felt immediately. This is why it is important as we note in our chapter, this is why it is important to have—for governments to think about a comprehensive strategy on how to implement these reforms. When you look at public sentiment across different sort of steps of these reforms, what we find that is really important is that countries that put in place compensatory mechanisms — whether this is cash transfers or more targeted transfers — really for those people who need it most have an easier time in carrying out these types of reforms. So in environments where the public does not trust the government, where there is weak accountability, doing these things up‑front in a very visible way, increasing support for social programs makes it very tangible to the public that the government is going to be doing this, and it is going to be accountable, if you will, for the fiscal savings that will be generated.

QUESTION: Good morning. As risks for the fiscal outlook have intensified and debt levels may rise even further, as stated in the Fiscal Monitor, how worried are you about any sort of global debt crisis or regional crises that can appear, considering slower growth and new spending pressures on countries?

Mr. Vitor Gaspar: As you heard yesterday, recession and crisis more than an individual nature are not in our reference projections, although, of course, part of the role of the Fiscal Monitor is precisely to systemically look at risks and vulnerabilities, and our public‑debt‑at‑risk tool is one of the instruments to do exactly that.

Now, one point which I believe is very important is that precisely because risks and uncertainty are so elevated right now, there is a sense of urgency in policy action. Why? Because there is still time to adopt policies that improve resilience, and there is still time to think through what are the most relevant vulnerability scenarios that apply to individual countries, to regions, or even to broader systems. And it is very important to do that result systemically so that one is ready if and when a crisis comes. Our experience during the pandemic showed that countries that had easy access to financial markets and ample fiscal space did substantially better than others at managing the shocks associated with the pandemic.

The Moderator: Thank you. We will get back to this part of the room.

QUESTION: My question is that you just mentioned the public debt remains very elevated and also this would cause fiscal space to continue to narrow down in many countries, including some major economies. So, what consequence will this bring to the world global economy if this kind of situation continues to develop?

Mr. Vitor Gaspar: So I think that the answer that I gave to the question just now applies, given these elevated risks and uncertainties, it is crucial that countries focus on keeping their own house in order since situations around the world are so diverse, as Era emphasized, that will imply different policies in different countries. But the crucial thing is that in a situation that is as fast changing as the one we are facing now and where risks and uncertainties are so elevated, there is an urgency in acting to improve fiscal space, build buffers, and, therefore, be in a position to ensure resilience and sustain growth.

The Moderator: Thank you. We will get back to this part of the room. The gentleman with the red shirt, please.

QUESTION: Thank you very much. Allow me to back‑pedal to the EMDEs. The Fiscal Monitor speaks about the need to widen the tax base. A number of frontier market economies have been rolling out significant economic present stacks and minimum top‑up tax in line with the Pillar 1 and Pillar 2. But now this puts them in the cross‑hairs with the Trump administration, and many are now wondering whether they should be rolling back. So which pathway does the Fund see sustainable, considering many are looking at preferential access to the American market?

Mr. Davide Furceri: Regarding the tax, I think it is important to make three important points. The first is that in the current situation where many emerging market and developing countries are characterized by three factors, one, foreign aid is declining; second, we have seen that increasing financial volatility can increase interest rates in these countries. This is in a situation where interest rates over revenue for many countries is about 10 percent of GDP. Third, [volatile] financial conditions also implies that less flows will go to these countries. The point that we make in the Fiscal Monitor is that revenue and revenue mobilization can be a stable source for financing significant spending for social benefit or public investment. How we should strengthen revenue mobilization, typically there are three sorts of arrows that you can go. One is expanding the tax base. Second, eliminate tax exemptions. Third, which is also important, and that the IMF does a lot of work in terms of capacity development is strengthening tax administrations. When we think about the tax strategy, we have to consider all of these three elements, and for many emerging markets and developing countries, there are significant potential tax gains that can be achieved.

The Moderator: Yes, please.

Mr. Vitor Gaspar: Just one word of addition. Davide correctly pointed out these three very important elements, broadening the tax base, dealing with tax expenditures and strengthening revenue administration. Yesterday I participated in a high‑level panel precisely on the mobilization of resources, and these three elements were repeated by the Ministers of Pakistan, Paraguay and Rwanda, and they found this frame relevant in their own experience of trying to improve the capacity of their countries to mobilize revenues.

The Moderator: We have two questions online. I think this one will be for you, Era, about Spain. Yesterday they revised upwards the growth of Spain and have already highlighted the good performance of the Spanish economy. What should this country do with these good growth results regarding its fiscal policies in the short and medium term? And we will have another one for South Africa online.

Ms. Era Dabla‑Norris: Thank you for the question. Given Spain’s relatively strong fiscal position as well as economic position, there is scope now to front‑load some of the adjustment that they were thinking about because public debt levels in Spain still remain very high, although they have come down from the pandemic peaks. They still remain very high. This would be really important to put debt firmly down on a downward trajectory.

Accumulative adjustment of about 3 percent of GDP over the next three years, say 2025 to 2029, similar to the one that was envisaged in terms of magnitude by the authorities but more frontloaded, would help achieve the goal. Now, as Vitor has pointed out, we are encouraging countries to bring debt down for a number of reasons. This is important because you want to reduce debt risks. This is important because countries should either expand or replenish the buffers that were diminished in the wake of the pandemic and also because of ongoing uncertainties. Finally, because countries will need—countries like Spain will need to spend on other areas, population aging, climate, defense and such.

The Moderator: Just before we go to South Africa, any other European question? One time, two time, no European question in the room. OK.

QUESTION: Thank you. The question on South Africa but also on the broader region: On South Africa, the IMF is quite significantly more pessimistic on the fiscal trajectory than our own government, which sees debt stabilizing, whereas the IMF sees it rising close to 90 percent of GDP at the end of the decade. Why are you so much more pessimistic of the authorities’ promised consolidation? But also on the region, sub‑Saharan Africa more broadly, how do you see the impact of what is happening globally on the region’s ability to borrow and particularly to borrow in international markets, and given a lot of the countries in the region are in debt distress or close to debt distress, what impact will that have on the economies of the sub‑Saharan Africa? Thank you.

The Moderator: Thank you very much.

Ms. Era Dabla‑Norris: Thank you very much. Briefly on South Africa, the general government deficit in South Africa was about 6 percent of GDP in 2024. We project the fiscal deficit in 2025, although this is subject to considerable—all projections are subject to considerable uncertainties at this juncture to be around 6.6 percent of GDP. This is mainly driven by higher spending. Some of the differences stem from the fact that our projections are based on much more conservative assumptions regarding the buoyancy of the tax system, as well as the extent of primary spending compression that can be undertaken. So that really accounts for differences in projections between the two countries and also the path of debt going forward. Let me turn it over to Davide.

Mr. Davide Furceri: Yes, more broadly and on financing costs for sub‑Saharan African regions, let me point out two factors. The first is that, of course, we have seen interest rates rising. So, this increasing interest rate in many countries, including South Africa, is basically driven by two factors. You have sort of an interest rate in main advanced economies that has been on a rising trend. On the positive side, in many countries, especially those with better fiscal positions, you actually have seen spreads, so the difference between the domestic interest rate and the foreign interest rate declines. However, and this is something that we point out in the Fiscal Monitor, that increased risk, increase of risk of uncertainty, financial market volatility, can turn things around. In other words, we see that increasing financial market volatility globally can lead to an increase in spreads.

The second point is that one part we have seen for many low‑income countries since the pandemic is they are relying much more on domestic issuance of debt rather than on the foreign market. This is on one hand sort of offset some of the challenges like to the global environment but also increase some sort of domestic vulnerability, because sometimes the interest rates rise. There are things that are important to think about this strategy. But definitely, as we mentioned, interest rate is a source of rising in terms of revenue is a source of concern. Let me make the point again that we made, I think strengthening fiscal buffers, revenue mobilization are important elements to reduce — to have this trend to decline.

The Moderator: Thank you. I believe we received some questions for Latin America and, yes, there are some reporters in the room. Yes, please, the lady in the third row here.

QUESTION: Thank you. You already talked about emerging markets, but focusing on Latin America, I want to know which one—you already have talked about it too, but which one is the biggest fiscal risk and what should economies in Latin America should be thinking about doing in terms of growing and accepting new investment, for example, to confront the situation abroad? Thank you.

Ms. Era Dabla‑Norris: Thank you for your question. Many of the risks that other emerging market economies face, countries in Latin America obviously also face, we have already talked at length about that. But I am going to talk about a few things that are specific to many of the countries in Latin America. So, there is two challenges that limit fiscal flexibility in Latin America. The first is that there are spending rigidities. What I mean by that is there is a lot of amounts of spending that is mandatory, on pensions, on wages, on transfers. This leaves very little room for fiscal flexibility.

At the same time, like many other emerging markets and developing economies, spending pressures are on the rise. There are growing demands for social services, for infrastructure, for adopting to climate change, and all of these are putting pressures on the budget. Now, when you look at what has happened since the pandemic, countries have made ambitious plans to consolidate their budget. There have been ambitious announcements of fiscal consolidation plans, but at the same time expenditure increases have outpaced revenue gains. So, for many countries in the region, we see debt levels continuing to rise. And the challenge here is that we are in a world with greater uncertainty than we were even six months ago. So, it is really important for countries in the region to implement at a minimum the announced fiscal consolidation plan and to do this within credible medium‑term frameworks. Many countries in Latin America and the Caribbean region have fiscal rules. So to implement these rules, to spend efficiently, to think about the types of fiscal reforms that are needed, whether it is revenue mobilization in countries where revenue‑to‑GDP ratios are low, whether it is spending prioritization or reprioritization, to create the room that is needed for priority investments and social spending and infrastructure and such.

The Moderator: Thank you. One last question.

QUESTION: I am from Thailand. I want to ask about the overall trend of the public debt, especially for the ASEAN 5. It would be great if you could mention specifically on Thailand.

The Moderator: I think we had the Nigeria question to answer too, and we will close there. Thank you.

Mr. Davide Furceri: Let me start with Nigeria. So, Nigeria managed to do a very difficult reform that was important to deliver fiscal savings. The authorities also scaled up transfers, technical transfers. What we think there is, what is important to act on two pillars. One is to generate additional fiscal savings. We mentioned revenue mobilization. To really scale up spending on social protection, spending on investment, in a way as was mentioned, many countries, they need to spend, and there I want to go back to Vitor’s first remarks. We encourage countries to spend very wisely. Strengthening prioritization in terms of spending, strengthening the efficiency of spending is important. Final important message we would like to give for Nigeria but also for other countries is that fiscal institutions are very important. Having a medium‑term fiscal framework, Public Financial Management are key important because on the one hand they try to help the fiscal anchor, so they set apart for the fiscal adjustment, but also reduce the fiscal uncertainty per se. So as Vitor mentioned, we want the fiscal to be a source of stability and not a source of uncertainty, and that is where fiscal institutions have an important role to play.

The Moderator: Thank you. Very quickly, Era.

Ms. Era Dabla‑Norris: On ASEAN, there is a huge variation in fiscal positions across the region. On average, the ASEAN region debt‑to‑GDP ratios are lower than they are in other emerging market and developing economies. That said, in Thailand, relative to the other countries in ASEAN, debt levels are slightly more elevated, over 60 percent of GDP. Our advice has been that fiscal policy should be prudent and parsimonious, given all the reasons we have discussed over the course of this morning. So, measures that are needed to smooth adjustment in light of higher tariffs should be thought of in a wise way, temporary, targeted measures in the context of tariff uncertainty, and ongoing consolidation plans implemented to bring debt down in a sustainable manner.

The Moderator: Thank you very much