IMF Annual Report Warns of Debt Pressures, Financial Risks, and Global Fragmentation
SDG 8: Decent Work & Economic Growth | SDG 17: Partnerships for the Goals
Institutions: Ministry of Finance
The IMF Annual Report 2025 highlights that the global economy has entered a period of slower growth and heightened uncertainty, with weaker long-term prospects compared to the past decade. A central concern is the surge in public debt, which threatens fiscal sustainability in both advanced and developing economies. The IMF stresses that urgent fiscal adjustment, through expenditure restraint, revenue mobilisation, and structural reforms, will be required, though politically challenging to implement.
The report also flags mounting financial stability risks, citing vulnerabilities in capital markets, financial institutions, and sovereign debt, compounded by tighter global monetary conditions. These factors heighten the danger of spillovers and contagion across economies. The IMF warns against fragmentation in trade and capital flows, urging bold and cooperative policy shifts to maintain trust in the multilateral system and safeguard resilience.
Reaffirming its mandate, the IMF underscores its threefold role: surveillance of global trends, lending to countries in distress, and capacity development through policy advice and technical support.
What is Fiscal Adjustment? β A process where governments reduce deficits by cutting expenditure or raising revenue, aimed at restoring macroeconomic balance and stabilising debt.
For India, the warnings are directly relevant. Although Indiaβs debt levels are more stable than many peers, fiscal pressures from welfare schemes, subsidies, and infrastructure spending could intensify in a volatile global environment. External shocks-through capital flow volatility and commodity price swings-pose added risks. India must combine prudent borrowing, financial sector resilience, and gradual consolidation with structural reforms that sustain growth momentum. Engagement with the IMFβs technical assistance can add resilience, while preserving policy independence.
Follow the full news here: IMF Annual Report 2025