The debt comes due—but there is no one to pick up the tab

After IMF Managing Director Kristalina Georgieva delivered her opening statement for the 2026 IMF–World Bank Spring Meetings last week, the headlines soon followed: “IMF warns of lasting economic damage from the Iran war,” wrote Euronews, and “War to trigger demand for up to $50 bln in Fund support,” reported Reuters.

Yet amid the focus on the fallout of the Iran war, another key point in Georgieva’s speech largely went unnoticed. Toward the end of her remarks, the IMF chief noted: “Public debt is generally much higher than twenty years ago—including in most G20 countries—reflecting widespread neglect of fiscal consolidation in the periods when conditions permitted it.”

It was a sober assessment that may have sounded less urgent than her remarks on how to “cushion the Middle East war shock,” but it should have received just as much attention.

An era of easy borrowing comes to an end

For over two and a half decades, advanced economies such as the United States, Europe, and Japan have invested heavily in expanding social safety nets. Meanwhile, emerging markets have been spending aggressively to catch up—building infrastructure and investing in human capital.

Although the environment for borrowing was favorable for much of that period—defined by relative peace, moderate growth, and strong employment conditions—the IMF recognized the risk of this trend as early as 2017. Back then, Georgieva’s predecessor, Christine Lagarde, warned: “Pleasant as it may be to bask in the warmth of recovery… the time to repair the roof is when the sun is shining.” But the world did not heed Lagarde’s advice. Instead of reducing debt burdens, countries kept spending beyond their means, gradually increasing the public debt-to-GDP ratio from around 30 percent to 100 percent.

Still, everything seemed just fine—until the biggest supply shock in modern history struck: the COVID-19 pandemic. What happened next is well known: To shield their economies, governments worldwide deployed extensive emergency packages, resulting in a $9 trillion fiscal expansion, roughly three times larger than during the 2008 global financial crisis. At the same time, the IMF provided $650 billion in reserve liquidity through a historic Special Drawing Rights allocation.

Paired with supply shortages, this led to the highest global inflation since the 1970s, peaking at 8.8 percent in 2022. Central banks stepped in, pivoting from loose monetary policy to tightening—and rates rose dramatically around the world.

Thus, the landscape for fiscal expansion has changed dramatically: from low to high interest rates, from relative stability to supply chain disruptions and heightened geopolitical tensions.

At the same time, the money spent over the last two decades has not necessarily translated into higher productivity and growth. With borrowing costs now much higher, global public debt-to-GDP stood at 94 percent in 2023.

Why the postwar playbook no longer applies

As the 2026 IMF–World Bank Spring Meetings get underway, the outlook remains unchanged—and the path of debt accumulation continues. What’s notable, however, is that the world has seen comparable levels of debt before.

During World War II, public debt-to-GDP ratios reached similar heights, peaking above 125 percent in the 1950s, only to be gradually reduced over the following decades. By the early 2000s, they had fallen to around 30 percent.

Given this historical lesson, the question is not whether high debt can be reduced, but whether the tools that worked then can still be applied today. The short answer: they can’t.

Postwar debt reduction was anchored by five policy pillars. First, financial repression required banks to hold public debt and capped interest rates, keeping borrowing costs low. Second, the Bretton Woods system of fixed exchange rates helped stabilize currencies and limit capital flight. Third, the postwar reconstruction boom expanded GDP, shrinking debt ratios without spending cuts. Fourth, inflation eroded the real value of fixed-rate debt when other measures fell short. Fifth, the United States and the United Kingdom reinforced this by running budget surpluses, with taxes exceeding non-interest spending.

It was the simultaneous operation of all five pillars that made postwar deleveraging both rapid and successful. The postwar playbook, however, is no longer available to policymakers. The Bretton Woods system of fixed exchange rates ended in 1971, replaced by floating exchange rates and open capital markets, which largely rule out financial repression. Meanwhile, central banks gained independence, and forcing them to artificially suppress interest rates is no longer an option. The same applies to inflation. Monetary policymakers spent decades building credibility by keeping prices in check. Allowing inflation to run persistently high would erode that trust.

The world has tried—and failed—to grow out of debt

Therefore, the only lever from the postwar playbook that remains is growth—and policymakers have certainly tried to pull it. In fact, the most widely adopted strategy for escaping the debt trap has been to simply grow out of it. Governments around the world have been introducing “growth-friendly” policies—from China’s Belt and Road Initiative and the EU’s NextGenerationEU package to the US CHIPS and Inflation Reduction Acts. Unfortunately, this strategy has largely failed to deliver sufficient relief, and fiscal deficits have continued to outpace GDP gains. In fact, of the 151 fiscal consolidation attempts recorded across thirty-one economies between 2000 and 2020, only 37 percent succeeded in reducing debt—with success rates falling from 45 percent in the 2000s to 32 percent in the 2010s (see chart below).

If growth is off the table, what is left for policymakers? The answer is the old-fashioned fiscal policy mix: cutting expenditures—rolling back social safety nets and other public programs—while raising revenues through higher taxes, whether existing or new. Yet both options are deeply unpopular and, in the current political climate, unlikely to be implemented at the required scale.

So when the IMF publishes its updated Fiscal Monitor at the 2026 spring meetings this week, the diagnosis will be all too familiar—elevated debt levels, sizeable deficits, and a lack of urgency. Just like Georgieva’s and Lagarde’s warnings, the point will be well-founded, rigorously argued—and most likely ignored.

History suggests that fiscal reckoning rarely arrives on schedule. It arrives when markets force it. At that point, however, the room to navigate has already narrowed, policy options are fewer, costs are higher—and the burden falls on those least able to pay the price.

Bart Piasecki is an assistant director at the Atlantic Council’s GeoEconomics Center.

Image: Series I and Series EE US Savings Bonds with a one hundred dollar bill overlay. Source: iStock.