Global government debt has climbed to levels not seen since World War II and is poised to exceed 100% of world GDP, IMF Managing Director Kristalina Georgieva told CNBC. Advanced economies are the most exposed, she said, noting that for the past 17 years, governments have been able to expand borrowing comfortably as interest rates remained below growth rates. The recent rise in rates has ended that easy arithmetic and created fresh fiscal risks.

Georgieva warned that strains are already visible in Europe. Stress in German sovereign debt markets has begun to spill over beyond France and Italy to Portugal and Ireland, hitting even countries that tightened budgets after the euro‑area crisis. Higher borrowing costs are pushing up debt-service bills and constraining governments’ room to support economic growth.

The picture is complicated by developments in the United States, where 10‑year Treasury yields have risen above 5.2% amid higher oil prices and inflation risks. Expensive credit is drawing capital into US assets, intensifying pressure on other countries. The IMF cautioned that without spending cuts and tighter control of new borrowing, the global financial system could face significant instability.