Global public debt has reached a new high-IMF
2022.12.12 10:45
Global public debt has reached a new high-IMF
Budrigannews.com – The International Monetary Fund reported on Monday that global public and private debt fell to levels not seen in 70 years in 2021, but that overall levels remained well above pre-pandemic levels.
The IMF stated in a blog that was included with its first Global Debt Monitor that total public and private debt would decrease by ten percentage points to 247% of global GDP in 2021, down from its peak of 257% in 2020. This is in contrast to 2007, prior to the global financial crisis, when GDP was around 195%.
Global debt reached a record $235 trillion last year, but it continued to rise at a much slower rate in dollars.
According to data from 190 nations, the global lender said that the overall decrease was driven by private debt, which includes non-financial corporate and household obligations. Private debt decreased by 6 percentage points to 153% of GDP.
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It claimed that public debt dropped to 96% of GDP by 4 percentage points, the largest drop in decades.
The IMF stated that the economic recovery from COVID-19 and the ensuring rapid rise in inflation were the causes of the unusually large swings in debt ratios, which it referred to as the “global debt rollercoaster.”
The dynamics of debt varied greatly among country groups. Public and private debt decreased by 5% of GDP last year in advanced economies, followed by similar results in emerging markets, excluding China.
However, in 2021, total debt ratios in low-income nations continued to rise due to higher private debt, reaching 88% of GDP.
With an estimated 25% of emerging market countries and over 60% of low-income countries either in or near debt distress, concerns about the ability of low- and middle-income countries to repay their debts are growing.
In a blog that was also published on Monday and was written by IMF fiscal affairs chief Vitor Gaspar and two other senior economists, they stated that it would become increasingly challenging to manage the high levels of debt if the economic outlook continued to deteriorate and borrowing costs continued to rise.
In 2022, high inflation levels helped reduce debt ratios, but spending will rise if inflation continues, which could result in higher premiums.
They suggested that governments should pursue fiscal policies that continue to support the most vulnerable while also assisting in the immediate reduction of inflationary pressures and debt vulnerability over the long term.
They stated, “Confidence in long-term stability is a precious asset in times of turbulence and turmoil.”
