Global debt declines for first time in ten quarters, says IIF

GLOBAL debt declined for the first time in 10 quarters by 1.7 trillion to 289tn in the first three months of 2021, according to the Institute of International Finance.

However, despite the dip in the first quarter, total global debt is still up 30tn or 12 percent since the end of 2019, and now stands at more than

288tn as countries grappling with widening fiscal deficits and the impact of COVID-19 on their economies continue to borrow amid low interest rates, the IIF said in its latest Global Debt Monitor.

The drop in debt was entirely driven by mature markets, where total debt dropped 2.3tn to below

203tn. However, debt in emerging markets rose slightly by 0.6tn in Q1 to a record high of more than 86tn, the IIF said.

“While near-term sovereign debt vulnerabilities in major emerging market economies have eased back to pre-pandemic levels, government revenues remain under pressure due to continued lockdowns,” the IIF said.

“With vaccination still relatively slow in many emerging markets, sovereigns with high borrowing needs risk having persistently high interest expenses relative to revenues and gross domestic product.”

Governments and central banks globally have provided more than 12tn in monetary and fiscal support since the outbreak of the Covid-19 pandemic. Interest rates have been cut and liquidity injections and asset purchases by central banks have helped prevent a financial meltdown. However, governments are still looking at widening fiscal deficits amid an uneven global economic recovery.