The International Monetary Fund (IMF) warned on Wednesday that global government debt is on track to reach levels not seen since the height of the Covid-19 pandemic.
The great majority of the predicted debt increase over the next five years would be borne by China and the United States, according to Vitor Gaspar, head of the IMF’s Fiscal Affairs department, in an interview with AFP.
He was addressing ahead of the release of the International Monetary Fund’s Fiscal Monitor report on Wednesday morning.
“We have in 2023 a situation where public debt is higher than what was expected pre-pandemic,” he said.
He also projected that public debt would expand faster than forecasted prior to the epidemic.
According to Gaspar, the US government debt as a percentage of economic output (debt-to-GDP ratio) is anticipated to reach its pandemic-era peak by 2027.
Meanwhile, China’s debt-to-GDP ratio is likely to climb year after year. According to the IMF, its debt burden will be nearly double that of pre-pandemic levels by 2028.
This is largely due to China’s shift from an export-driven to a domestic demand-driven economy, according to Gaspar.
Aside from the United States, China, and a few other countries, most other countries’ debt burdens are improving in the medium term.
According to Gaspar, debt-to-GDP ratios will fall in more than 60% of countries over the next five years.
In response to mounting global debt, the IMF is presenting a “strong case for fiscal tightening,” according to him.
Fiscal easing would enable monetary policy to reduce inflation “without such sharp increases in interest rates,” he said.
