IMF Urges Major Economies to Consolidate Budgets, Before Markets Force Them To

By James Glynn

SYDNEY--The International Monetary Fund has ramped up its warning to major economies about the need for urgent budgetary consolidation, saying governments must act before financial markets force them to.

"What we know is that tipping points are unknown, but the more you wait the more risks are that we have reached a tipping point," Rodrigo Valdés, director of fiscal affairs at the IMF, said Wednesday.

"Countries need to consolidate before markets force them [to]," Valdés said on a panel at the IMF-World Bank Group meetings in Bangkok.

The warnings come as yields on sovereign debt soar around the world amid concerns about stubborn inflation, increasing government borrowing, and the potential for a slowdown in the global economy due to rising fuel prices and geopolitical tensions.

"I would say that our message today is slightly different than in the past. The sense of urgency needs to be understood differently," Valdés said. "What we are saying is that it is urgent, and it is now," he added.

"The conditions have changed. We knew there was risk of higher debt and higher yields. Now higher yields have materialized," he added.

The rise is government bond yields this year has seen debt-servicing costs in a number of major economies jump to their highest levels since the 1990s.

Still, some of the upward pressure on yields comes from debt raising by firms attached to the boom in artificial intelligence, which is crowding out government borrowing.

The U.S. economy has also proved to be more resilient than expected, fueled in part by the build-out of AI data centers and the energy infrastructure needed to support them.

"The stakes are higher now as borrowing costs go up," said Era Dabla-Norris, deputy director of fiscal affairs at the IMF, who also participated on the panel.

Write to James Glynn at james.glynn@wsj.com

(END) Dow Jones Newswires

October 13, 2026 23:43 ET (03:43 GMT)