The managing director of the International Monetary Fund, Kristalina Georgieva. JULIEN WARNAND (EFE)
The global debt burden fell for the second consecutive year to $235 trillion in 2022, but is still above its already high pre-pandemic level. These are the data that the International Monetary Fund (IMF) published this afternoon in a presentation in which the institution analyzed the evolution of debt before and after Covid-19. Total debt was 238% of global gross domestic product (GDP) last year, 9 percentage points higher than in 2019. This figure is $200 billion above 2021 levels as global GDP rose faster than global debt.
The institution emphasizes that public debt remained “persistently high”, although there was a recovery in economic growth from 2020 and inflation remained much higher than expected. This was due to the heavy spending by many governments to stimulate their economies and respond to increases in food and energy prices.
As a result, public debt fell by only 8 percentage points of GDP over the past two years, offsetting about half of the pandemic-related increase, according to the “Global Debt Monitor” by the panel led by Kristalina Georgieva. Private debt, which includes household debt and non-financial corporate debt, fell more quickly, falling by 12 percentage points of GDP.
The Global Debt Database notes that China has played a central role in the rise of global debt in recent decades, as borrowing outpaced economic growth. Its debt-to-GDP ratio has risen to about the same level as that of the United States, while China’s total debt ($47.5 trillion) is still below that of the United States (about $70 trillion).
The IMF recommends that governments take urgent action to reduce debt vulnerability and reverse long-term debt trends. With regard to private sector debt, such measures could include careful monitoring of the debt burden of households and non-financial corporations and the associated risks to financial stability. Regarding public debt vulnerability, establishing a credible fiscal framework could guide the process to balance spending needs with debt sustainability.
For developing countries – more than half of which are over-indebted or at high risk – the agency calls for improving opportunities to generate additional tax revenue. For those with unsustainable debt, she believes a comprehensive approach is also needed that includes restructuring their debt within the G-20 common framework.
The institution emphasizes that reducing the debt burden creates fiscal space and enables new investments, helping to promote economic growth in the coming years. Labor and product market reforms that increase productive potential at the national level would support this goal, and international cooperation on taxation, including carbon taxation, could further reduce pressure on public financing.
The Bank of Spain data is consistent with that of the IMF. Since 2021, when public debt peaked at 123% of GDP in the second quarter, there has been a gradual decline to 112.8% in the first quarter of 2023. However, it is still far from pre-pandemic levels, when debt was high at 98% of GDP. This Monday, the Ministry of Finance published the data on the public deficit, which cumulatively reflected an increase to 37,682 million euros up to July, representing 2.68% of gross domestic product (GDP) and 56.8% more than last year in the same period (24,027 million) .
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