Global debt reaches $226 trillion, India’s dues projected to grow by 90.6% in 2021 – IMF

Signage displayed outside the IMF | Alex Wroblewski | bloomberg

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Washington: The International Monetary Fund said on Wednesday that global debt has hit a new high of USD 226 trillion, with India’s outstanding dues up to 90.6 per cent in 2021, due to COVID-19 and policies to respond to it. estimated to increase. .

Advanced economies and China contributed more than 90 percent of the worldwide debt accumulation in 2020. The remaining emerging economies and low-income developing countries contributed only about seven percent.

Due to COVID 19, and policies designed to respond to it, debt levels rose sharply and reached higher levels. High and rising levels of public and private debt are associated with increased risk to financial stability and public finances, Vitor Gaspar, IMF director of the Department of Financial Affairs, told reporters during a release of the 2021 Financial Monitoring Report.

He said the debt of governments, households and non-financial corporations increased from US$226 trillion in 2020 to US$27 trillion in 2019. This increase is the biggest ever recorded.

This figure includes both public and non-financial private sector debt.

In its 2021 Financial Monitoring Report, the IMF said India’s debt increased from 68.9 per cent of its GDP in 2016 to 89.6 per cent in 2020. It is projected to fall to 90.6 percent in 2021 and then to 88.8 percent in 2022. Gradually reaching 85.2 percent in 2026.

Gaspar said the constraints on financing are particularly severe for poor countries. 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-sided, he said.

Gasper said debt is expected to decline this year and about 1 percent per year next year.

After that its GDP is estimated to be stable at around 97 percent. He said these credit dynamics are driven by a strong contribution from nominal GDP growth, as well as a more gradual reduction in the primary deficit.

The IMF said in its report that the risks to the fiscal outlook have increased. Growth in vaccine production and distribution, especially for emerging markets and low-income developing countries, will limit further damage to the global economy.

On the downside, new forms of the virus, low vaccine coverage in many countries, and delays in some people’s acceptance of vaccination can cause new damage and put pressure on the public budget. It said recovery of contingent liabilities, including loan and guarantee programs, could also lead to an unexpected increase in government debt.

Further pressures could come from social discontent, projected to throw 65 to 75 million people into poverty in 2021 relative to pre-pandemic trends. The IMF said large government financing needs are a source of vulnerability, especially in emerging markets and low-income developing countries, where financing conditions are sensitive to global interest rates and central banks have begun raising short-term reference rates. .

It said fiscal policy would need to facilitate change to meet these challenges and make the global economy more productive, inclusive, green and resilient to future health or other crises.

At the same time, ensuring transparency and accountability, setting a medium-term path for rebuilding the fiscal buffer and making progress towards the Sustainable Development Goals will be critical. –PTI

Read also: Urgent need to reform UN, World Bank, IMF, make it more transparent: Sitharaman

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