Global debt surges to record high $188tn: IMF chief

Muscat Daily - - BUSINESS -

Wash­ing­ton, US - The global debt load has surged to a new all-time record equiv­a­lent to more than dou­ble the world’s eco­nomic out­put, In­ter­na­tional Mon­e­tary Fund (IMF) chief Kristalina Ge­orgieva warned.

While pri­vate sec­tor bor­row­ing ac­counts for the vast ma­jor­ity of the to­tal, the rise puts gov­ern­ments and in­di­vid­u­als at risk if the econ­omy slows, she said.

“Global debt - both public and pri­vate - has reached an all-time high of US$188tn. This amounts to about 230 per cent of world out­put,” Ge­orgieva said.

That is up from the pre­vi­ous record of US$164tn in 2016, ac­cord­ing to IMF fig­ures.

While in­ter­est rates re­main low, bor­row­ers can use debt to make in­vest­ments in pro­duc­tive ac­tiv­i­ties or weather a bout of low com­mod­ity prices.

But it can be­come ‘a drag on growth’, she said.

“The bot­tom line is that high debt bur­dens have left many gov­ern­ments, com­pa­nies, and house­holds vul­ner­a­ble to a sud­den tight­en­ing of fi­nan­cial con­di­tions,” she cau­tioned.

Cor­po­rate debt ac­counts for about two thirds of the to­tal but gov­ern­ment bor­row­ing has risen as well in the wake of the global fi­nan­cial cri­sis.

“Public debt in ad­vanced economies is at lev­els not seen since the Sec­ond World War,” she warned. “Emerg­ing mar­ket public debt is at lev­els last seen dur­ing the 1980s debt cri­sis,” the IMF chief said.

She called for steps to en­sure ‘bor­row­ing is more sus­tain­able’, in­clud­ing mak­ing lend­ing prac­tices more trans­par­ent and pre­par­ing for debt re­struc­tur­ing with ‘non-tra­di­tional lenders’ - an ap­par­ent ref­er­ence to China, which has be­come a ma­jor cred­i­tor to de­vel­op­ing na­tions in­clud­ing in Africa.


Kristalina Ge­orgieva

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