What struck me about IMF Managing Director Kristalina Georgieva’s recent speech was not simply her warnings about inflation and interest rates. More importantly, she offered a different perspective on the challenges facing the global economy. The world is no longer dealing with isolated shocks that can be addressed through a single policy instrument. Supply disruptions, rising public debt and higher borrowing costs are increasingly becoming part of the same economic problem. This is making the task of governments and central banks more difficult and leaving policymakers with less room to respond.

 

The figures highlighted by Georgieva deserve particular attention. Despite the war and continuing disruptions to trade and energy markets, the IMF still expects global economic growth of around 3 per cent in 2026. Yet this growth is taking place in a highly uncertain environment. Shipping activity through the Strait of Hormuz has fallen to around 10 per cent of its pre-war level, while oil prices have nevertheless remained below $150 a barrel. This demonstrates the global economy’s ability to adjust to major disruptions, but it also shows how exposed the world remains to risks involving energy, supply chains and international trade.

 

The distinction between a supply shock and a demand shock is crucial. When inflation is driven by strong demand, a central bank can raise interest rates to restrain spending and ease price pressures. But when inflation is caused by higher energy prices, rising transportation costs or disruptions to supply chains, higher interest rates cannot increase oil supplies, restore trade flows or reduce transportation costs. They can, however, weaken investment, consumption and credit, ultimately putting pressure on economic growth.

 

The challenge becomes even greater when public debt is already high. Higher interest rates do not affect the private sector alone. They eventually feed into government finances as well. As governments refinance maturing debt at higher rates, debt-servicing costs increase. This places greater pressure on revenues or creates a need for additional borrowing, leaving less fiscal room for education, healthcare, investment and infrastructure.

 

This is what makes Georgieva’s message particularly relevant to Jordan. Global public debt is now at its highest level since the Second World War and is expected to exceed 100 per cent of global GDP during this decade. At the same time, long-term government bond yields in major economies have risen to levels not seen for many years. The 10-year US Treasury yield has reached its highest level since 2007, while the equivalent yields in France and Japan are at their highest levels since 2008 and 1996 respectively.

 

The implications extend well beyond the major economies. Global interest rates influence financing conditions elsewhere, particularly in countries that depend heavily on borrowing or need to refinance significant amounts of debt on a regular basis. As global borrowing costs rise, the cost of servicing debt can rise as well.

 

This matters even more for Jordan because ours is a small and open economy, highly exposed to developments in energy, trade, transportation and the wider region. Higher oil prices, for example, do not simply increase the energy bill. They can raise transportation and production costs, feed into domestic prices, and affect the current account and economic activity. If such a shock occurs while interest rates are high and public debt remains substantial, the room available to policymakers becomes considerably narrower.

 

This is why every economic shock cannot simply be met with higher government spending. Fiscal support may be necessary under certain circumstances, but difficulties arise when temporary spending becomes a permanent commitment financed through borrowing. What may ease the pressure today can create a larger burden for tomorrow’s budget. At the same time, monetary policy cannot be expected to carry the full burden of dealing with shocks that originate primarily on the supply side.

 

What is needed is greater consistency between fiscal and monetary policy. Fiscal policy should control deficits and rebuild fiscal buffers. Monetary policy should preserve price stability. Debt management should focus not only on the size of debt, but also on its cost, maturity and refinancing risks. At the same time, economic policies should aim to raise productivity, strengthen investment and support sustainable real economic growth.

 

This is where growth becomes critical. Debt reduction cannot depend solely on cutting expenditure or increasing revenues. A faster-growing economy expands the revenue base, strengthens the government’s capacity to service its debt and makes it easier to reduce the debt-to-GDP ratio. For Jordan, therefore, the debt challenge is also fundamentally a challenge of growth, productivity and investment.

 

The message I take from the IMF’s analysis is clear. The world is entering a period in which economic shocks may become more frequent, debt levels are higher and interest rates have a greater impact on public finances. Fiscal space therefore needs to be built during periods of stability, not after a crisis has already arrived.

 

For Jordan, the objective should not simply be to reduce the debt ratio in any particular year. The more important goal is to ensure that debt is less costly, has longer maturities and carries lower refinancing risks, while keeping the primary deficit under control and raising real economic growth sufficiently to create a broader economic base for debt servicing.

 

A country that enters the next crisis with lower debt, a controlled deficit, longer maturities, manageable borrowing costs and an economy capable of generating growth will have more options available to it. Waiting for the crisis and then looking for fiscal space is usually the most expensive way to respond.