Dabla-Norris made her remarks in response to Ahram Online’s questions about the key drivers behind the country’s expected downward path of debt through FY2029/2030, as projected in the latest Fiscal Monitor report released on Wednesday. This took place during a press briefing the IMF held to launch the report on the sidelines of the IMF–World Bank Annual Meetings being held in Washington, DC.

Speaking to Ahram Online, Dabla-Norris praised Egypt’s fiscal discipline and policy efforts, noting that a combination of expenditure restraint and revenue mobilization measures drove the surplus. At the same time, she highlighted that Egypt increased its social protection spending by 12 percent, reflecting a balanced approach to fiscal consolidation and social support.

“Egypt’s fiscal performance this year reflects a careful balancing act,” Dabla-Norris said. “The government managed to contain spending while expanding social protection, which is commendable.”

She added that further reductions in Egypt’s debt ratio are expected over the medium term, in line with the country’s fiscal reform trajectory. However, she cautioned that Egypt’s debt service burden remains substantial, with interest payments alone absorbing nearly three-quarters of government revenues.

“This level of debt servicing significantly limits the fiscal space available for other priorities,” Dabla-Norris warned, underscoring the importance of continued reforms to reduce financing costs and enhance revenue efficiency.

On the global front, Dabla-Norris noted that many countries have yet to return to their pre-pandemic fiscal positions.

“In some large economies, debt is rising even faster than before the pandemic,” she said. “Others have seen stabilization, but debt levels remain elevated.”

The IMF continues to urge governments to adopt sustainable fiscal strategies that balance growth, equity, and debt sustainability, especially in light of rising interest rates and mounting global uncertainties.

Global debt risks are widespread, even in low-ratio economies
 

Global public debt continues to rise, driven largely by major economies within the G20, but risks are not confined to high-debt countries, warned Vitor Gaspar, Director of the Fiscal Affairs Department at the IMF, in his answer to an Ahram Online question on the main reasons that led the Fund to expect elevated debt levels globally.

Gaspar explained that, from a mechanical decomposition perspective, large economies are the primary contributors to the upward trajectory of global debt ratios.

“In my introductory remarks, I listed several G20 members that are pushing global public debt levels higher,” he said.

However, Gaspar cautioned against assuming that countries with lower debt-to-GDP ratios are immune to fiscal distress. “Some countries with relatively low public debt levels also have very low debt tolerance,” he noted. “This means they may face significant risks despite having modest debt ratios.”

To illustrate the point, Gaspar referenced an IMF staff map presented during the session that outlines the Fund’s assessment of public debt risks worldwide. The map highlights that vulnerabilities are widespread and not solely determined by headline debt figures.

The IMF continues to advocate for tailored fiscal strategies that account for each country’s capacity to manage debt sustainably, emphasizing that debt tolerance varies widely depending on institutional strength, market access, and macroeconomic stability.

Trade tensions, tech boom risks, and fiscal fragility threaten global outlook
 

Global growth is holding steady for now, but the outlook remains fragile and vulnerable to escalating trade tensions, tech-driven market volatility, and fiscal pressures, warned Gaspar.

During the event, Gaspar confirmed that global growth is projected at 3.2 percent in 2025 and 3.1 percent in 2026, at the modest end of the downgrade range forecasted in April. Inflation, however, has proven more persistent than expected.

“The tariff shock turned out smaller than feared,” Gaspar said, citing trade exemptions, restrained retaliation, and the private sector’s agility in rerouting supply chains. He also pointed to loose financial conditions, a weaker dollar, expansionary fiscal policy in countries such as Germany and China, and booming AI-driven investment in the US as factors that are cushioning the impact.

Yet Gaspar cautioned that the tariff shock is real and continues to dim already weak growth prospects. “Even in the US, growth has been revised down, the labor market is softening, and inflation remains above target, clear signs of a negative supply shock,” he said.

The IMF’s downside scenario warns that renewed trade tensions, particularly restrictions on critical materials, could reduce global output by up to 0.3 percentage points.

“The outlook is very sensitive to developments on the trade front,” Gaspar added, referencing recent tariff threats between the US and China.

Beyond trade, Gaspar flagged four major downside risks. He noted that the surge in artificial intelligence (AI) investment echoes the dot-com boom of the late 1990s.

While it is driving consumption and capital gains, it could prompt tighter monetary policy. A sharp market correction, he warned, would reduce wealth, dampen investment, and spill over into broader financial conditions.

China’s growth model was one of the risks he mentioned, noting that continued weakness in China’s property sector and reliance on subsidized strategic investment raise concerns about resource misallocation and stagnant productivity. “Industrial policy can boost targeted sectors, but it comes with fiscal costs and potential spillovers,” Gaspar said.

He also noted that many countries have made insufficient progress in rebuilding fiscal space. With lower growth, higher real interest rates, and rising spending needs—from defence to climate adaptation—fiscal positions remain precarious. Low-income countries are especially vulnerable, facing reduced aid flows and heightened risks of social unrest.

Political pressures on central banks are also among the risks Gaspar warned against, explaining that they could lead to easing monetary policy prematurely.

“Calls to reduce interest rates to support activity or lower debt service costs—at the expense of price stability—always backfire,” he said. “Trust in central banks anchors inflation expectations. Once that erodes, macroeconomic stability deteriorates.”

Despite these risks, Gaspar emphasized that the outlook could improve if key policy actions are taken.

“Resolving trade uncertainty through clear agreements and lower tariffs would boost output,” he said. “AI has real potential to raise productivity, and improved domestic policies can enhance resilience and reduce macroeconomic risks.”

He concluded with a call for governments to restore fiscal space, improve spending efficiency, and maintain independent, transparent monetary policy. “Above all,” Gaspar said, “governments must invest in the future and empower private entrepreneurs. That’s how we build resilience and unlock sustainable growth.”