EDITOR'S NOTE: The International Monetary Fund (IMF) is concerned about the record global debt in 2021, according to Bloomberg. The outlet reports, “Global debt surged to a record $226 trillion last year, raising concerns about its sustainability as interest rates rise.” If interest rates rise quickly — as they may have to in order to combat inflation — heavily indebted countries and corporations will have to pay down more debt than expected, which will slow spending and economic growth. This worldwide debt has grown significantly as governments borrowed to provide massive stimulus programs to citizens affected by the pandemic. The IMF’s Vitor Gaspar wrote on the issue, “The risks will be magnified if global interest rates rise faster than expected and growth falters. If the public and private sectors are forced to deleverage simultaneously, growth prospects will suffer.” With all the talk about debt-restructuring and digitization of currencies worldwide, it would be nice to have an asset with zero liabilities that you can hold in your own hand, right? Non-Fungible, Sovereign-Minted gold and silver will be essential! Call us for more information at 800-474-9159.
(Bloomberg) -- Global debt surged to a record $226 trillion last year, raising concerns about its sustainability as interest rates rise, the International Monetary Fund said.
Faster-than-expected interest rate hikes could put pressure on heavily indebted nations and force governments and companies to cut back on debt and spending, hurting economic growth, IMF officials said in a report Wednesday.
Global debt climbed by 28 percentage points to 256% of gross domestic product in 2020, the largest one-year surge since World War II, they said, citing figures from the fund’s latest Global Debt Database.
As interest rates rise, fiscal policy is typically adjusted as governments spend more on servicing debt and cut back on expenditure in order to keep deficits under control.
“The risks will be magnified if global interest rates rise faster than expected and growth falters,” the IMF officials, led by Vitor Gaspar, wrote. “If the public and private sectors are forced to deleverage simultaneously, growth prospects will suffer.”
Public debt soared in advanced economies last year as governments rolled out huge fiscal stimulus to cope with the Covid-19 pandemic. Emerging and low-income countries saw debt ratios surge because of a significant fall in nominal GDP, according to the researchers.
Borrowing by governments accounted for slightly more than half of the increase in global debt in 2020, with the global public debt ratio jumping to a record 99% of GDP, according to the report. China alone accounted for 26% of the global debt surge last year, it said.
Government debt in advanced economies surged to 124% of GDP in 2020 from just around 70% in 2007, according to IMF. Private debt in these economies, on the other hand, rose at a more moderate pace to 178% from 164% over the period, it said.
©2021 Bloomberg L.P.
Originally posted on Bloomberg.