In a new report, the International Monetary Fund (IMF) says global debt rose to $229 trillion in 2020, the largest one-year debt surge since World War II.
According to latest IMF’s Global Debt Database, global debt rose by 28 percentage points to 256 percent of GDP in 2020.
Interesting, emerging markets (excluding China) and low-income countries accounted for small shares of the rise in global debt, around $1-$1.2 trillion each, mainly due to higher public debt.
The Bretton Wood Institute attributes the rise to the global health crisis 2hich led to a shutdown of businesses around the world.
The global financial institute noted that borrowing by governments accounted for slightly more than half of the increase.
“Debt increases are particularly striking in advanced economies, where public debt rose from around 70 percent of GDP, in 2007, to 124 percent of GDP, in 2020. Private debt, on the other hand, rose at a more moderate pace from 164 to 178 percent of GDP, in the same period,” the report said.
The body, therefore, urged policymakers to strike the right balance in the face of high debt and rising inflation.
According to the report,debt was already elevated going into the crisis, but now governments must navigate a world of record-high public and private debt levels, new virus mutations, and rising inflation.
“The large 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,” the report said.
