Global public debt has advanced to historic highs, and global debt to GDP ratios have surged to levels last seen during World War II, says IMF.
Global debt has advanced to historic highs, and global debt to GDP ratios have surged to levels last seen during World War II, says IMF. “Public debt is currently at historic highs in advanced and emerging market economies. Average debt-to-GDP ratios, at more than 105 per cent of GDP in advanced economies, are at levels not seen since World War II,” Vitor Gaspar, Director of IMF Fiscal Affairs Department said at a news conference in Washington on Wednesday.
In his address, Vitor Gaspar highlighted that while India’s debt to GDP ratio is “quite high”, the country is trying to lower it using “the right policies.” Gaspar said that India’s general government debt remained relatively high, at 70 per cent of its GDP in 2017, but the government is planning to bring it down over the medium term with the use of right policies. Decoding these ‘right policies,’ he pointed out that India is targeting a federal deficit of three per cent over the medium term. “They are also targeting a debt ratio of 40 per cent over the medium term at the federal level, which corresponds to about 60 per cent at the general government level. And we believe that those targets are appropriate,” PTI reported Vitor Gaspar as saying.
Further, Gaspar noted that global debt reached a record high in 2016 at $164 trillion, or almost 225 per cent of global GDP. China alone, he said, has contributed to 43 per cent increase to global debt since 2007, PTI report said.
A recent report by Institute of International Finance said that global debt has swelled to all-time high of $237 trillion in 2017. Interestingly, $21 trillion was added to global debt in the previous year alone. To put things in perspective, India’s GDP stands at around $2.3 trillion in 2016. While this may be a reason to worry, the report says that the World-GDP to debt ratios are declining, thanks to world GDP growth running above potential. “Despite the sharp buildup in the stock of global debt in 2017, the cyclical pickup in global growth and still-benign global financing conditions have helped bring debt ratios down slightly,” IIF noted in the report.