IMF says governments are squeezing savers as debt piles up

Financial repression has risen to its highest levels in decades as governments with elevated debt increasingly face constraints in using conventional fiscal measures to reduce their fiscal pressures, the International Monetary Fund (IMF) has said.

The IMF made this known in a Working Paper titled “The Coming Great Repression? New Measures and a Century of Evidence,” prepared by Marijn A. Bolhuis, Jakree Koosakul, Neil Shenai and Jie Yang.

The paper examines the historical use of financial repression to reduce government debt and fiscal pressures, finding that repression has increased significantly since the global financial crisis while warning that its continued use could carry costs for financial development, private investment and economic growth.

Financial repression refers to government policies that encourage or force private savings into public debt, allowing governments to borrow at relatively lower costs. Such policies can include interest-rate controls, high bank reserve requirements and capital controls.

What the report is saying

The study found that financial repression reached its highest levels in decades during the post-global financial crisis period.

• Financial repression was a significant contributor to postwar debt reduction, with both fiscal and monetary channels re-emerging since 2008.
• Repression indicators tend to rise alongside higher public debt and low or negative real returns on government debt.
• The IMF said fiscal repression can arise through existing prudential requirements that create structural demand for government bonds.
• The monetary channel could also become more important as central banks’ post-quantitative easing reserve holdings expand the public sector’s claim on the financial system.

The IMF said the findings suggest that governments may increasingly rely on financial repression where political support for fiscal consolidation, structural reforms and debt restructuring is insufficient.

The IMF said conventional options for reducing debt remain available, including fiscal consolidation, growth-enhancing structural reforms and debt restructuring. However, each faces significant constraints.

“Fiscal consolidation requires strong political cohesion and social support, both of which are increasingly scarce in fragmented advanced-economy political systems,” the paper stated.

Debt restructuring, meanwhile, can damage a sovereign borrower’s reputation and restrict access to capital markets, the paper maintained.

The IMF said these constraints could encourage governments to turn to less conventional methods of reducing fiscal pressures, including financial repression.

The IMF cautioned that modern financial markets differ significantly from the postwar period, when financial repression was particularly effective because domestic institutions were more captive, capital accounts were more restricted and savers had fewer alternative assets.

Nigerian context

Nigeria’s fiscal and monetary environment provides a relevant context as the country continues to manage elevated public debt and borrowing costs.

The Debt Management Office reported that Nigeria’s total public debt rose to N159.28 trillion as of December 31, 2025, while the CBN has projected public debt at 34.68% of GDP by the end of 2026.

Nigeria’s monetary policy has also undergone a significant tightening cycle under CBN Governor Olayemi Cardoso.

The Monetary Policy Rate rose from 18.75% in 2023 to 27.5% by the end of 2024, while the Cash Reserve Ratio for commercial banks was raised from 32.5% to 45% and later to 50%.

As inflation pressures moderated, the CBN began cautiously easing monetary policy in late 2025. The MPR was subsequently reduced to 26.5% in February 2026 and has remained at that level through the 305th and 306th Monetary Policy Committee meetings.

The IMF’s findings highlight the trade-offs facing governments managing high debt: while financial repression can ease fiscal pressures, its potential impact on private credit, investment, financial development and growth makes it an important policy risk to monitor.

What you should know

According to IMF, global public debt is on track to exceed 100% of Gross Domestic Product (GDP) by 2029.

In April 2025, IMF issued a warning about the rapid increase in global public debt, urging countries, particularly emerging markets, to implement stronger fiscal policies to mitigate risks and stabilize their economies.

• According to the IMF’s projections at the time, global public debt is expected to rise by 2.8% in 2025, more than double the 2024 estimates, pushing overall debt levels beyond 95% of gross domestic product (GDP).