The International Monetary Fund (IMF) in its latest report on fiscal opportunities warned that the global public debt is on track to exceed 100,000 billion dollars (91.9 billion Euros) by the end of this year.
That’s 10 percent above the 2019 level, before the pandemic.
”Global public debt is very high. It is expected to exceed 100,000 billion dollars, which is about 93 percent of global gross domestic product (GDP) by the end of this year, and will approach the volume of 100 percent of GDP by 2030,” the IMF said, according to the Guardian.
The IMF is concerned that this high debt reduces the fiscal space available to governments to respond to economic downturns, making it more difficult to invest in growth-enhancing projects. It also increases the risk of state crises, that is, of countries having difficulties in repaying their debts.
The IMF is concerned that the fiscal situation in many countries could be worse than expected due to three reasons: large pressures on consumption, excessive optimism in debt projections and significant unidentified debts. The announcement also stated that countries will have to increase spending due to population aging and health care; due to the transition to green energy and climate adaptation, as well as defense and energy security due to growing geopolitical tensions.
The IMF warns that in the next five years, the debt-to-GDP ratio could be as much as 10% higher than projected, if, for example, growth is weaker than expected or financial conditions are stricter.
