Global Debt Reaches A Record $226 Trillion

Weekly Insight: A Closer Look At Public Sector Debt Transparency Initiatives-Brand Spur Nigeria
Weekly Insight: A Closer Look At Public Sector Debt Transparency Initiatives-Brand Spur Nigeria

Due to the coronavirus pandemic, the global economic situation experiences situations that were only experienced in times of wars or international catastrophes.

Inflationary processes are in all nations and some of them, as is the case in the United States, they already announce measures with which they plan to change this by 2022.

In this context, a report carried out by the International Monetary Fund shows that 2020 saw the largest increase in debt in a year since World War II. “World debt increased 28 percentage points to 256% of global GDP“, Vitor Gaspar, Paulo Medas and Roberto Perrelli commented in a text that the organization published.

One of the key points highlighted by specialists is that over the next year, governments will have to find a balance point between high indebtedness and rising inflation. “A significant tightening of financial conditions would exacerbate pressure on the most indebted governments, households and companies“, they explained in that sense.

According to the report, to find a moment in history where so much debt has been taken on in one year you have to go back to the WWII. Although debt levels were high before the pandemic, they never matched those at that time when humanity suffered one of its worst warfare.

“Governments face a world with unusually high levels of public and private debt, new mutations of the virus and rising inflation “, they commented from the International Monetary Fund. Along these lines, they add that monetary policies today are reoriented towards increasing inflation.

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Global Debt Reaches A Record $226 Trillion

“Public debt contributed a little more than half of the increase, and the public debt ratio soared at an unprecedented level of 99% of GDP; and the private debt of non-financial companies and households also reached new highs, “they explain.

According to the IMF, advanced economies and China They accounted for more than 90% of the $ 28 trillion debt increased in 2020 as most developing economies face limited access to funds and often higher interest rates.

“If the public and private sectors are forced to deleverage simultaneously, growth prospects will be clouded“The report’s authors noted. Both emerging market and low-income countries face high debt ratios due to a sharp decline in nominal GDP in 2020.

Public debt in emerging markets reached record highs and in low-income countries it rose to levels not seen since 2000. The sharp increase in debt was justified by the need to “protect people’s lives, preserve jobs and avoid waves of bankruptcies “, they explained, and highlighted that” if governments had not taken measures, the social and economic consequences would have been devastating“.

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