IMF tells advanced economies to ‘bring debt down’ as borrowing costs rise

Advanced economies like the UK and US are being urged to cut borrowing and reduce their debt levels by the head of the International Monetary Fund (IMF), Kristalina Georgieva. In an exclusive interview, Georgieva warned that global economic shocks have been pushing up debt levels, which she described as "not to heaven." However, governments have failed to take any action to contain the rising cost of servicing this debt. Georgieva emphasized the need for "courage" from politicians to take the necessary steps.

The warning comes as government borrowing costs have surged due to wars disrupting oil supplies, leading to higher global borrowing costs. In August, the UK government's borrowing was £18.3bn ($24.4bn), almost a fifth higher than the previous year and higher than official forecasts. Similarly, the US, the world's largest economy, has a debt of $40tn, which has doubled within a decade, causing concerns both domestically and internationally.

Georgieva emphasized that advanced economies have control over domestic policies despite economic factors beyond their control. She stressed that bringing debt levels down and prioritizing fiscal consolidation are critical steps. Georgieva praised planning and housing reforms in the UK and acknowledged that advanced economies lack cash to boost growth, relying on reforms to encourage private sector investment.

Georgieva also raised concerns over AI's potential financial stability risks, citing recent incidents where AI systems have taken a life of their own as a potential problem. The IMF's managing director highlighted that the global economy is affected by two forces: the energy price shock and investment in AI. She stressed the importance of resuming durable oil and gas exports from the Gulf to alleviate the energy supply shock.