The International Monetary Fund (IMF) has reported that global debt reached $ 226 trillion in 2020, the largest debt surge in a year since World War II.
Global debt rose 28 percentage points to 256 percent of GDP in 2020, according to the latest update to the Washington-based institution’s global debt database, the IMF explains in an article published by a group of its experts on the IMFBlog portal.
According to the blog’s authors, “Debt was already high before the crisis, but governments must now navigate a world where public and private debt levels are peaking, new viral mutations are occurring and inflation is occurring. increases “.
Government borrowing accounted for just over half of the increase, with the global public debt ratio reaching an all-time high of 99% of GDP, the same source said, noting that the private debt of non-financial corporations and household income has also reached new highs.
The increase in debt is particularly striking in advanced economies, where public debt has grown from around 70% of GDP in 2007 to 124% of GDP in 2020. Private debt, meanwhile, has grown steadily. more moderate, from 164% to 178% of GDP during the same period.
Public debt now accounts for almost 40% of total global debt, the highest share since the mid-1960s.
“The accumulation of public debt since 2007 is largely attributable to the two major economic crises that governments have faced – first the global financial crisis, then the COVID-19 pandemic,” it says.
For experts from the Bretton Woods institution, the sharp increase in debt was “justified by the need to protect people’s lives, preserve jobs and avoid a wave of bankruptcies”.
“If governments had not taken action, the social and economic consequences would have been devastating,” say the authors of the article.
The IMF notes, however, that soaring debt amplifies vulnerabilities, especially as financing conditions tighten. “High debt levels limit, in most cases, the ability of governments to support recovery and the ability of the private sector to invest in the medium term,” one explains.
A crucial challenge is to find the right mix of fiscal and monetary policies in a context of high debt and rising inflation, notes the IMF, indicating that “fiscal and monetary policies have fortunately complemented each other at the height of the pandemic”.