OECD and IMF urge governments to slash spending as bond yields hit 15-year highs

The world's two most influential economic institutions issued back-to-back warnings on Wednesday urging governments to rein in spending as bond yields across the developed world climbed to their highest levels in 15 years, deepening concerns about the sustainability of ballooning public debt.

Twin Warnings From Paris and New York

The OECD, in its interim economic outlook published Wednesday under the title "Weathering Successive Shocks," said rising bond yields "underline more than ever the need for enhanced efforts to contain and reallocate government spending, improve public sector efficiency and strengthen revenues to ensure longer-term debt sustainability". The Paris-based body revised its global growth forecast to 2.9 percent for 2026, noting that higher energy and agricultural commodity prices stemming from the Middle East conflict were weighing on the outlook.kyfreepress+2

Speaking separately on the sidelines of the United Nations General Assembly in New York, IMF Managing Director Kristalina Georgieva told the BBC that global economic shocks had been "pushing debt levels up like a staircase not to heaven" but that governments had taken "no action to contain that service cost". She called on advanced economies to "bring debt levels down, put fiscal consolidation as a priority, and make sure that the central banks deliver on their mandate for price stability". "It is impossible to stress strongly enough how critical it is to get the courage to take the steps that are necessary," she added. "These are politically tough steps to take, but necessary steps to take".bbc

Record Debt, Rising Costs

The warnings land amid a grim fiscal backdrop. U.S. government debt surpassed $40 trillion for the first time in August, having doubled in roughly a decade, according to Treasury Department data. In the UK, debt interest payments hit their highest August figure since monthly records began in 1997. France's public debt is projected to reach 120 percent of GDP. Meanwhile, emerging market government debt has climbed to roughly 78 percent of GDP — the highest ratio in data going back to 1880, according to IMF Fiscal Monitor projections, more than doubling from around 38 percent at the time of the 2008 financial crisis.news.sbs+4

Advanced economies have remained above 100 percent of GDP for a full decade, with IMF data projecting that ratio to rise toward 115 percent by 2031. The OECD's own Global Debt Report earlier this year noted that public and private borrowing reached record levels in 2025.coingabbar+1

AI and Energy Add Crosscurrents

Both institutions flagged artificial intelligence as a complicating factor. Georgieva warned that AI systems that take on "a life of their own" could present a financial stability risk, while the OECD noted that AI-related investment in data centers was boosting growth in the United States, Canada, and Australia even as energy costs from the Middle East conflict dragged on other economies. Georgieva described the energy shock and AI investment boom as "two forces pushing in opposite directions" across the global economy.kyfreepress+1