The International Monetary Fund (IMF) has warned that the UK's gross debt when compared to gross GDP could increase to 90.6% by 2015. in 2007 it was only 44.1%.

The US it says could fare worse as it projects our American cousins facing gross debt to GDP figures rising from 62.1% in 2007 to 109.7% in 2015.

When looking at the G-20 countries, according to the IMF general government debt was 78% in 2007, reached 97% in 2009 and will reach 115% in 2015. With 10% of this stemming from fiscal stimulus packages.

Effectively the IMF report indicates that we ignored granny's advice. Governments borrowed in the bad times, which is fair enough if the money is well spent and granny may well approve. But in the good times just about all of them failed to repay the debt and reign in the spending, something granny would not approve of!

The IMF says that the resulting limited 'fiscal space' (the difference between current and maximum sustainable public debt) may well catch countries with their pants down when the markets suddenly put borrowing rates up with little or no notice.

The IMF wants a sea-change in the way countries deal with their deficits and debt issues.

"As a result, countries will need to modify their past behavior and clearly define their fiscal plans for the long-term, including pension and health care reforms. A credible future course for policy that differs fundamentally from normal historical patterns is needed when fiscal space is limited."

"Countries’ policy options depend in large part on how much fiscal space they have. History is not destiny, and limits to public debt are neither etched in stone nor a prediction that default is inevitable in cases of limited fiscal space. They are nevertheless a wakeup call that policy cannot proceed on a “business as usual” basis."

What they are saying shouldn't need saying. Countries have leveraged themselves up to the hilt. And having wasted the opportunity in the good times they now need to bite the bullet and pay the debt down or some may get bitten by the markets – hard! That's the sort of advice a good bank manager gives the indebted customer isn't it?

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