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World debt soars to $235tn, as US, China contribute 50%

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The world’s total debt has reached a staggering $235 trillion, and a significant chunk of this colossal sum, amounting to $117.5 trillion, is attributable to the United States and China combined.

This startling information comes from the International Monetary Fund (IMF), which recently published a report titled “Global Debt Is Returning to its Rising Trend.”

The report reveals that in just one year, from 2021 to 2022, global debt increased by a jaw-dropping $200 billion, pushing it to an astonishing 238% of the world’s Gross Domestic Product (GDP). This figure is a troubling nine percentage points higher than what was recorded in 2019, signaling a worrisome and alarming trend.

What draws particular concern in the IMF’s assessment are the developed nations, which are identified as the primary contributors to this surging global debt. The spotlight falls squarely on economic giants such as China and the United States, accounting for a staggering $117.5 trillion collectively, with China responsible for $47.5 trillion and the United States for $70 trillion.

The IMF also underscores China’s significant role as the world’s largest contributor to non-financial corporate debt, holding a substantial 28% share of this debt globally.

Additionally, the IMF’s report highlights the unsettling rise in debt levels in low-income developing countries over the past two decades. The period following the global financial crisis has witnessed a rapid accumulation of debt in these economies, leading to various challenges and vulnerabilities as explained in the report.

Presenting the global debt update were three distinguished officials from the IMF: Vitor Gaspar, the Director of the Fiscal Affairs Department; Marcos Poplawski-Ribeiro, Deputy Director; and Jiae Yoo, an economist.

Their report carries a solemn warning for policymakers worldwide, urging them to remain steadfast and unwavering in their commitment to preserving debt sustainability.

More insight

In light of the mounting debt challenges, the IMF offers guidance to governments worldwide, urging them to take immediate and decisive measures to mitigate debt vulnerabilities and reverse the ominous long-term debt trajectory.

When it comes to managing private sector debt, the IMF recommends vigilant monitoring of household and non-financial corporate debt burdens, along with closely monitoring related financial stability risks.

  • “For low-income developing countries, improving the capacity to collect additional tax revenues is key, as we discussed in our April Fiscal Monitor.
  • “For those with unsustainable debt, a comprehensive approach that encompasses fiscal discipline as well as debt restructuring under the Group of Twenty Common Framework—the multilateral mechanism for forgiving and restructuring sovereign debt—when applicable is also needed, as noted in the April World Economic Outlook.”
  • “Importantly, reducing debt burdens will create fiscal space and allow new investments, helping foster economic growth in coming years.

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