Introduction: IMF sounds alarm over rising government borrowing costs
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The jump in government borrowing costs this year is causing concerns at the International Monetary Fund, as policymakers gather in Bangkok for its annual meeting.
In its new fiscal monitor report, released this morning, the IMF is warning that the rise in sovereign bond yields has “raised the fiscal stakes” facing governments, as they try to keep borrowing under control.
Higher borrowing costs are adding to fiscal pressures at a time of high debt, making credible consolidation more urgent, it points out.
And it is demanding action, warning that “the more countries wait, the more painful the adjustment becomes.”
This is easier said than done, though! France, for example, faces a struggle to push through a budget that would only cut its annual deficit to 5% of GDP. And in the UK, chancellor John Healey could face a battle with his own MPs if he proposes welfare cuts in his budget later this month.
The IMF points out that since February – when the Iran war began, and oil prices jumped – the average 10-year government bond yield for G7 countries increased by over 1 percentage point, reaching its highest level in nearly two decades.
With global public debt expected to exceed 100 percent of global GDP for the first time since the immediate aftermath of World War II, this is not a great time for borrowing costs to be hitting the roof.
Or, as the IMF puts it:
The IMF points out that the cost of servicing government debts have already jumped sharply. In the US, for example, interest payments are projected to climb from about 2.8% of GDP before the pandemic to 5.7% in 2031, which is roughly equal to projected expenditure on Social Security.
It’s worse for low-income countries, where interest payments today consume over 15% of tax revenues.
The agenda
9am BST: IEA oil market report
9am BST: Foreign secretary Ed Miliband speaks at the IMF Annual Meeting in Bangkok
9.15am: Treasury select committee hearing on Heathrow expansion plans
1.30pm US inflation report for September
2.15pm Treasury Committee hearing on the Budget 2026
Diesel shortages could persist well into 2027
Shortgages of diesel that have driven prices to record level are set to extent well into next year, the International Energy Agency has warned.
In its monthly oil market report, just released, the IEA warn that prolonged disruptions to Middle Eastern and Russian exports have led to a fall in stocks of diesel, ahead of the peak winter demand season.
And while prices were pushed higher, demand remained strong, which the IEA says was partly due to “government measures aimed at easing the impact of high prices on consumers”.
This allowed oil refiners to cash in with higher profit margins (technically known as the ‘diesel crack spread’), at a time when drivers are paying billions of pounds more at the pumps:
The agency warns that it could take until the second half of next year for inventories to be replenished, saying:
The IEA also reckons that Donald Trump’s deal to buy diesel from Russia is unlikely to help much, explaining:
There’s been a quiet start to stock market trading in London this morning, with the FTSE 100 share index up just 6 points (0.06%) to 10,656 points.
Luxury goods maker Burbery (+2.6%) are the top riser, followed by engineering firm Babcock (+1.7%).
UK bond yields drop with Healey 'to avoid more borrowing' in budget
UK government borrowing costs are dropping this morning, which will please John Healey and the IMF alike!
The yield, or interest rate, on UK 10-year bonds is down 3.5 basis points to 5.4%, while thirty-year bond yields are 3bps lower at 5.89%.
That follows a report in the Financial Times this morning that Healey is expected to avoid increasing UK borrowing in the budget later this month.
The FT reports:
China on track for record trade surplus this year
China is on track to post a record high trade surplus this year, after exports soared in September.
New trade data shows that China’s exports soared by 36.3% year-on-year last month, the fastest monthly increase since February.
Imports jumped by 31.0%.
This pushed September’s trade surplus to $133.53bn, meaning China has now recorded a surplus of $938bn over the first nine months of this year.
That indicates the total surplus for 2026 could come in above the record $1.189tn recorded in 2025.
ING economist Lynn Song says:
Tim Jones, policy director at Debt Justice, has welcomed Ed Miliband’s call for a ‘new deal’ on debt for emerging economies:
Ed Miliband: Global financial system is failing developing countries
Ed Miliband is due to speak at the IMF meeting today, and our economics editor Heather Stewart has the inside line on his plans:
The foreign secretary, Ed Miliband, will claim the global financial system is failing developing countries, as he calls for a “new deal” for governments struggling under the burden of debt.
Promising to throw the UK’s diplomatic weight behind urgent reform, he will evoke the example of the Gleneagles summit under the last Labour government in 2005 – the culmination of the Make Poverty History campaign.
“The global financial system and indeed the global order is failing to serve developing countries on debt, on resilience and on climate. This is not just against our values but against our national interest,” Miliband is expected to say.
Speaking in Bangkok on Wednesday, he will call for the World Bank and other multilateral development banks (MDBs) to use the resources they have available to lighten the load for governments trapped by hefty borrowing costs.
“We need action on developing country debt through the MDBs,” he is expected to say.
Here’s the full story:
Not building third runway would be 'huge missed opportunity', Heathrow boss claims
Away from the IMF meeting, the boss of Heathrow airport has claimed it would be a “huge missed opportunity” not to build a third runway.
Thomas Woldbye told BBC Radio 4’s Today programme it would be “good to know” the government’s position on the project, after prime minister Andy Burnham refused to say whether he backed expansion.
Woldbye, who is due to appear before parliament’s transport committee today to discuss the issue, warned that Heathrow’s shareholders will invest elsewhere in the world if the third runway is blocked, rather than in the UK, arguing:
BoE's Pill wary of predictions of four rate rises
Elsewhere in Bangkok, Bank of England chief economist Huw Pill has suggested that the financial markets may be getting carried away by anticipating four increases in UK interest rates over the next year.
Speaking on the sidelines of the IMF’s meeting, Pill said:
Looking at the market pricing this morning, a rate rise in November looks very likely (a 92% chance). The markets then expect three further rate rises by next September.
Bank of England governor and IMF warn of rising cyber crime risks
Bank of England governor Andrew Bailey and IMF managing director Kristalina Georgieva have issued a stark warning about the growing risks of cyber-attacks and crime in the age of AI.
Georgieva cited her childhood growing up in Eastern Europe, when wary citizens didn’t trust the system, so kept their money in a shoebox under the bed.
She warned:
Bailey agreed, citing a warning from Anthropic this week that rogue AI agents may ‘self-replicate’ to hijack everyday devices.
“If you try to say what’s at the heart of this debate about AI? For me, it’s about trust in technology and it’s about human control to achieve that trust in technology,” he said, adding:
And he called for big tech firms to take more responsibility for fraud committed via their platforms. Contrasting their status today with the legal status in the UK of outlets such as newspapers, which are responsible for everything they publish, he said:
He added,
The pair were speaking on a panel to launch a “Bangkok blueprint for fraud resistance financial services” at the IMF/World Bank annual meetings.
IMF's Georgieva urges US to get its house in order
Wednesday morning at the IMF/World Bank annual meetings in Bangkok saw IMF managing director Kristalina Georgieva give her opening press conference, our economics editor Heather Stewart writes.
She enthusiastically reiterated the IMF’s call for major economies – including the US – to implement tougher fiscal policies. “Make urgent repairs to the fiscal house, before the cracks widen,” she said – and later:
She highlighted the imbalances between countries with big trade and fiscal surpluses – including China – and those with deep deficits, such as the US.
Georgieva was also asked about fiscal conditions in Europe – including France’s budget predicament; and why the UK’s bond yields remain so high, despite having a plan to cut its deficit – which the IMF has praised this week.
On the UK, she said:
She added:
On France, she insisted she was “positive,” about the government’s prospects of passing a budget that reduces future deficits and might reassure financial markets; but suggested the country’s travails were having knock on effects.
She says:
Pressure to increase defence spending is another factor pushing up government borrowing – and European countries may need to fund it through spending cuts rather that higher taxes or borrowing, the Fund indicated.
Speaking today in Bangkok, Rodrigo Valdes, head of the IMF’s fiscal affairs department, told reporters:
Valdes’s colleague Era Dabla-Norris warned:
Introduction: IMF sounds alarm over rising government borrowing costs
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The jump in government borrowing costs this year is causing concerns at the International Monetary Fund, as policymakers gather in Bangkok for its annual meeting.
In its new fiscal monitor report, released this morning, the IMF is warning that the rise in sovereign bond yields has “raised the fiscal stakes” facing governments, as they try to keep borrowing under control.
Higher borrowing costs are adding to fiscal pressures at a time of high debt, making credible consolidation more urgent, it points out.
And it is demanding action, warning that “the more countries wait, the more painful the adjustment becomes.”
This is easier said than done, though! France, for example, faces a struggle to push through a budget that would only cut its annual deficit to 5% of GDP. And in the UK, chancellor John Healey could face a battle with his own MPs if he proposes welfare cuts in his budget later this month.
The IMF points out that since February – when the Iran war began, and oil prices jumped – the average 10-year government bond yield for G7 countries increased by over 1 percentage point, reaching its highest level in nearly two decades.
With global public debt expected to exceed 100 percent of global GDP for the first time since the immediate aftermath of World War II, this is not a great time for borrowing costs to be hitting the roof.
Or, as the IMF puts it:
The IMF points out that the cost of servicing government debts have already jumped sharply. In the US, for example, interest payments are projected to climb from about 2.8% of GDP before the pandemic to 5.7% in 2031, which is roughly equal to projected expenditure on Social Security.
It’s worse for low-income countries, where interest payments today consume over 15% of tax revenues.
The agenda
9am BST: IEA oil market report
9am BST: Foreign secretary Ed Miliband speaks at the IMF Annual Meeting in Bangkok
9.15am: Treasury select committee hearing on Heathrow expansion plans
1.30pm US inflation report for September
2.15pm Treasury Committee hearing on the Budget 2026
