Global debt hit all-time high of $226 trillion in 2020: IMF

Global debt went up by the highest one-year jump in 2020 since World War II to reach a record $226 trillion, Arab News quoted the International Monetary Fund, as saying in a blog posting.

This came as countries grappled with the pandemic and a significant recession.

The IMF indicated that the surge in debt was justified to “protect people’s lives, preserve jobs, and avoid a wave of bankruptcies,” adding that otherwise the consequences would have been devastating.

Global debt rose by 28 per cent to stand at 256 per cent of the world GDP by the end of 2020, according to the IMF data. Specifically, advanced economies’ public debt increased to 124 per cent of GDP in 2020 compared to a lower 70 per cent in 2007.

Advanced economies and China were responsible for over 90 per cent of the $28 trillion rise last year.

Low interest rates made the widening in debt during the pandemic possible, the IMF said. However, developing countries faced more restricting access to funding.

The international lender added that there are certain risks related to the balancing of both fiscal and monetary policies, especially since the latter is now tightened to fight inflation

However, there will be further risks if rates increase faster than expected and growth weakens, as this will intensify pressures on the most highly indebted governments, households and firms.

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