Global public debt estimated to approach 100% of GDP by end of decade: IMF official
Economic consequences of high debt can no longer be dismissed in advanced economies, says IMF's first deputy managing director
By Ovunc Kutlu
ISTANBUL (AA) - Global public debt is estimated to approach 100% of GDP by the end of the decade, according to an official with the International Monetary Fund (IMF).
Public debt reached 93% of GDP in 2023, IMF First Deputy Managing Director Gita Gopinath said Wednesday at the Central Bank of Ireland’s Whitaker Lecture in Dublin.
"Global public debt has grown sizably over the last few years as governments tackled pandemics and energy and food insecurity," she said.
Debt in some of the biggest economies, like the US and China, is expected to grow even faster, compared to pre-pandemic years, according to Gopinath.
Although public debt in Europe is expected to stabilize broadly, it remains well above pre-pandemic levels, she noted.
Gopinath urged "a strategic pivot" in fiscal policy, since monetary policy is easing and unemployment remains low in many countries.
"This calls for further recognizing that the economic consequences of high debt can no longer be dismissed in advanced economies," she said. "Borrowing costs and economic activity are increasingly impacted by loose fiscal policy."
Gopinath emphasized that political and structural trends are increasingly pressuring governments to spend more and borrow more.
"If history is any guide, the trajectory of debt will be worse than any of us project today, and considerably so. This is not sustainable, and we need to strategically pivot," she added.
She urged countries like the US and most in Europe, where output is close to their potentials, to start on a path of gradual fiscal consolidation.
"The strategy with the greatest chance of success should focus on growth; have effective guardrails to ensure compliance; and foster close engagement with all stakeholders, including civil society, to ensure their buy-in," she said.
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