IMF warns of record debt levels

IMF warns of record debt levels

International Monetary Fund Managing Director Kristalina Georgieva has recently warned regions and countries of taking loans. Despite the fact that the world economy is currently on firmer footing, global debt may reach unprecedented levels.

The crisis has not passed yet. Besides, developments are diverging dangerously across countries. Therefore, the world has reached a critical turning point. In times of uncertainty, it is very unwise to increase the debt burden. Many countries took huge loans due to the coronavirus crisis, pushing global debt to the highest level over the past 50 years. Notably, the current surge in debt is not the first on record. In total, there have been four strong waves of debt accumulation during this time. The previous waves were the result of serious financial crises. The latest one arose due to the coronavirus pandemic significantly exceeding the first three debt waves.

"The global economy is coming back from the depths of the crisis. But this calamity is far from over. Risks remain high, including rising bankruptcies and stretched valuations in financial markets. And many countries have become more vulnerable. Their debt levels have increased because of their fiscal response to the crisis and the heavy output and revenue losses," Kristalina Georgieva stressed. She also added that global public debt could reach a record-high of about 100% to GDP.

Global debt is the total debt owed by the population, companies, financial institutions, and governments of all countries. Hence, the list of borrowers includes almost every country. Experts reckon that global debt spiked mostly due to the pandemic and the monetary policy of the world's largest central banks.


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