Global public debt has climbed to nearly 100 per cent of the world’s gross domestic product, its highest level since World War II, the International Monetary Fund has warned.
WASHINGTON — Global public debt has climbed to nearly 100 per cent of the world’s gross domestic product, its highest level since World War II, the International Monetary Fund has warned.
The IMF said debt was expected to rise further as elevated borrowing costs and weaker growth increased pressure on government finances.
“Public debt is now nearly 100 percent of GDP,” IMF Communications Director Julie Kozack told reporters here. “That's global public debt. That's the highest level since World War II.”
The warning came as the IMF assessed an uneven global economy buffeted by the continuing war in the Middle East, elevated energy prices and historically high sovereign bond yields.
“And we also see that public debt is set to climb further globally, and many advanced economies have high public debt-to-GDP ratios,” Kozack said.
The IMF said yields on 10-year government bonds in several major advanced economies had reached their highest levels in some time. It cited the United States, France and Japan.
Higher borrowing costs in advanced economies can quickly affect emerging markets and developing countries. Even nations that have improved their economic policies and strengthened their central banks face higher financing costs because their borrowing spreads are being added to elevated global benchmark rates.
“When we see these benchmark borrowing costs rise for advanced economies, that has an effect on pretty much all countries,” Kozack said, referring to an earlier statement by IMF Managing Director Kristalina Georgieva.
The IMF said many emerging economies had spent decades improving their policy frameworks and establishing independent central banks. Those changes helped narrow the additional interest rates, or spreads, demanded by investors.
But those narrower spreads now sit on top of higher benchmark yields, offsetting part of the benefit, Kozack said.
“All of these challenges essentially mean that policymakers are going to need to be both nimble and credible,” she said.
The IMF said governments were not required to undertake immediate and abrupt fiscal consolidation but needed to set out clear strategies.
“We're not in a situation where fiscal consolidation needs to take place overnight,” Kozack said. “But having a clear laid out plan and strategy for how deficits and debt are going to come down is very important for fiscal authorities.”
“Global growth is still much lower in this decade than it was in previous decades,” Kozack said.