IMF unveils April 2025 fiscal monitor

The International Monetary Fund (IMF) recently released its April 2025 Fiscal Monitor Report, shedding light on the current state of the global economy amidst escalating uncertainty and policy shifts. The report reveals that global public debt projections have been revised upwards due to various factors such as tariffs, market volatility, increased defense spending, and challenging foreign aid landscapes, intensifying risks for many nations worldwide. To delve deeper into the implications of these findings, CNBC Africa sat down with Era Dabla-Norris, Deputy Director at the IMF Fiscal Affairs Department. Dabla-Norris shared valuable insights on the state of fiscal affairs globally and the challenges that lie ahead. With trade tensions and policy uncertainty looming large, the global economic landscape is set for a turbulent ride. The swift escalation of these factors is expected to impact global economic activity significantly. According to Dabla-Norris, the IMF projects that global debt to GDP ratio will be 2.7 percentage points higher this year, reaching 95% of GDP. Even before recent events, many countries were already grappling with high debt levels, and the current developments are poised to exacerbate the situation further, with geoeconomic uncertainty alone projected to raise public debt by about 4.5% of GDP in the medium term. As fiscal policy faces a myriad of challenges, Dabla-Norris emphasized the need for countries to strike a delicate balance. High debt levels coupled with heightened uncertainty call for robust fiscal buffers to combat shocks. Moreover, rising spending pressures from various quarters necessitate tough decisions on resource allocation, be it for aging populations, defense needs, or development priorities. The dynamic nature of the global economy means that the fate of one country can have far-reaching consequences on others. The famous adage 'when the U.S. sneezes, the rest of the world catches a cold' underscores the interconnectedness of financial markets. Dabla-Norris highlighted that tighter financial conditions and increased market volatility in the U.S. can ripple across emerging markets and developing economies, leading to higher sovereign borrowing costs and heightened sovereign spread volatility. This could further impact commodity prices and squeeze fiscal positions in oil-exporting nations. To mitigate these risks, governments must act swiftly and decisively to instill confidence. The IMF's recommendations urge countries to focus on anchoring fiscal stability, tackling high debt levels, and fostering growth through structural policies. As governments navigate the intricate web of fiscal challenges, communication and strategic planning play crucial roles in implementing unpopular yet necessary reforms. Take, for instance, energy subsidy and pension reforms, which can be politically sensitive due to their immediate impact on citizens. Dabla-Norris highlighted success stories such as Morocco, where effective communication and strategic planning helped facilitate energy subsidy reforms even in challenging economic environments. As nations face the daunting task of reforming their fiscal policies, the key lies in transparency, communication, and a long-term vision. The road ahead may be riddled with uncertainties, but with proactive measures and prudent decision-making, countries can navigate through the challenges and pave the way for a more resilient fiscal future.