Public debt is higher and growing faster than predicted before the covid 19 pandemic, and it was mainly driven by the US and China, the world’s two largest economies, Vitor Gaspar, director of the IMF’s Fiscal Affairs Department, said today.
Debt-to-GDP ratios are projected to decline in 60 percent of countries by 2028, following spikes related to Covid-19, but a significant number of major economies, including Brazil, China and the US, are expected to see faster debt-to-GDP growth. GDP, Reuters reported.
Gaspar said global public debt rose to nearly 100 percent of GDP in 2020 before seeing its biggest decline in 70 years by 2022, although it remained about eight percentage points above pre-pandemic levels. Instead of normalizing, the ratio is expected to start rising again this year and reach 99.6 percent of GDP in 2028, he said.
“There are a significant number of large advanced economies, large emerging market economies, where public debt relative to GDP is projected to grow rapidly and this list of countries includes Brazil, China, Japan, South Africa, Turkey, the United States and the United Kingdom.” , Gaspar said for Reuters.
According to him, the dominant influence comes from the two largest economies. In contrast, in low-income developing countries, the increase in debt during the pandemic has been very moderate and is expected to fall to pre-pandemic levels in the coming years, Gaspar said.
Tighter budget constraints and growing food insecurity have stalled poverty reduction and hampered further progress towards the United Nations’ Sustainable Development Goals, the IMF said in its report.
In the future, all countries should closely coordinate their fiscal and monetary policies to fight inflation and build “buffers” that could be used in the event of a crisis, Gaspar said, noting that countries without enough “buffers” suffer longer and experience deeper recessions.
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