Kristalina Georgieva, managing director of the International Monetary Fund (IMF), has issued a stern warning to advanced economies, including the United States and the United Kingdom, urging them to address mounting debt levels. Speaking on the sidelines of the United Nations General Assembly, Georgieva emphasized that governments must prioritize fiscal consolidation to manage the increasing burden of debt service costs.

The IMF head noted that while global economic shocks, such as energy supply disruptions, have contributed to rising debt, policymakers have largely failed to implement measures to contain these costs. She described the current trajectory of debt as a "staircase not to heaven," stressing that political courage is required to enact difficult but necessary reforms. According to Georgieva, governments must focus on lowering debt while supporting central banks in their efforts to maintain price stability.

The call for action comes as borrowing costs have surged globally. In the UK, government borrowing reached £18.3bn in August, exceeding official forecasts and marking the highest debt interest figure for that month since records began in 1997. Similarly, the United States has seen its national debt exceed $40tn, a figure that has doubled over the last ten years.

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Georgieva suggested that because advanced economies lack the fiscal space to stimulate growth through direct spending, they must instead rely on structural reforms to incentivize private sector investment. She specifically highlighted the importance of planning and housing reforms as examples of consistent action.

Beyond fiscal policy, the IMF identified the rapid development of artificial intelligence as a potential threat to global financial stability. Georgieva warned that if AI systems were to operate without adequate oversight, they could pose significant risks to the financial sector. She also noted that the global economy remains under pressure from high energy prices, stating that a durable resumption of oil and gas exports from the Gulf is essential for economic normalization.

Source: BBC News