News “Global debt levels still above pre-pandemic.” Last Minute WORLD headlines and events
The International Monetary Fund (IMF) said that global public and private debt recorded its biggest decline in 70 years in 2021 after rising to record highs due to the effects of the COVID-19 pandemic. However, the IMF stressed that these debts are still above pre-pandemic levels.
Announcing the Global Debt Monitor report today, the IMF said that total public and private debt fell by 10 points in 2021 to 247 percent of global gross domestic product, a figure that peaked at 257 percent in 2020.
Before the global financial crisis hit in 2008, global debt was estimated to be 195 percent of gross domestic product in 2007.
Global debt has continued to rise, albeit at a slower pace, reaching a record $235 trillion last year, according to the IMF.
Private debt, which includes non-financial corporate and household debt, has led to an overall reduction in debt. Looking at data from 190 countries, the IMF showed that private debt fell by 6 percentage points to 153 percent of gross domestic product.
The IMF said public debt fell by 4 percentage points to 96 percent of gross domestic product, the biggest decline in decades.
The unusual fluctuations in debt ratios are related to the economy’s attempt to recover from the effects of COVID-19 and rapid inflation, according to the IMF.
Debt dynamics vary widely within country groups. The largest decline was recorded in the debts of developed economies.
Both the public and private debt of developed countries fell by 5 percent of their gross domestic product last year. Similar results were observed in emerging markets, with the exception of China.
But the overall debt ratio of low-income countries with higher private debt continued to rise in 2021. The total debt of these countries rose to 88 percent of gross domestic product.
Concerns about the ability of low- and middle-income countries to repay their debts are growing. An estimated 25 per cent of developing countries and more than 60 per cent of low-income countries are in or close to debt distress.
IMF Chief Financial Officer Vitor Gaspar and two senior IMF economists warned in a blog post released today that managing high levels of debt will become increasingly difficult if the economic outlook continues to deteriorate and borrowing costs continue to rise.
High inflation contributed to lower debt ratios in 2022. However, if inflation becomes sustainable, spending will increase. This will lead to higher premiums.
IMF officials noted that governments should now pursue fiscal policies that will help reduce inflationary pressures and debt vulnerabilities over the long term, while continuing to support the most vulnerable.
“Long-term stability is a valuable attribute in times of turmoil and unrest,” the officials said.
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