Global debt jumps to new high of $226 trillion, says IMF report

Sees risk of sizeable sell-off in stocks

Because of Covid-19 and policies put in place to respond to it, the global debt has jumped to a new high of $226 trillion, the International Monetary Fund (IMF) said on Wednesday. Advanced economies and China contributed more than 90 per cent to the accumulation of worldwide debt in 2020. The remaining emerging economies and low-income developing countries contributed only around seven per cent.
 
“Because of Covid 19, and of policies put in place to respond to it, debt levels increased fast and reached high levels. High and rising levels of public and private debt are associated with risks to financial stability and public finances,” IMF Director of Fiscal Affairs Department Vitor Gaspar told reporters during a release of the 2021 Fiscal Monitor Report. “The debt of governments, households and non-financial corporations added up to $226 trillion in 2020 — $27 trillion above 2019. This increase is, by far, the largest on record,” he said. This figure includes both public and non-financial private sector debt.
 
Constraints on financing are particularly severe for poorer countries, Gasper said. Noting that in 2020, fiscal policy proved its worth, he said the increase in public debt, in 2020, was fully justified by the need to respond to Covid-19 and its economic, social, and financial consequences. But the increase is expected to be one-off, he said. Gasper said debt is expected to decline this year and next — by about 1 percentage point of GDP per year.
 

IMF sees risk of ‘sizeable’ sell-offs in stocks, housing market
 
The IMF warned of the risk of sudden and steep declines in global equity prices and home values as the Federal Reserve and other central banks withdraw the support they’ve provided during the pandemic.
 
‘Great financing divide’ between rich, poor nations slows recovery
 
Economic growth in poorer countries will likely lag pre-pandemic expectations for years, given gaps in vaccination rates, revenue growth and the ability to borrow, the IMF said.