Global debt reached record-high of $164 trillion in 2016: IMF
What's the story
The global debt has reached a record high in 2016 at $164 trillion, or almost 225% of GDP, said Vitor Gaspar, Director of IMF. He noted that most of the debt is in advanced economies although, in the last 10 years, emerging market economies have been responsible for most of the increase. China alone has contributed 43% to the increase since 2007. Here's more.
Looming risks
Build strong public finances in good times
Vitor Gaspar advised countries to avoid procyclical fiscal policies that exacerbate economic fluctuations and ratchet up public debt. Gaspar also advised countries to build strong public finances in good times in order to tackle looming risks. "Average debt-to-GDP ratios, at more than 105% of GDP in advanced economies, are at levels not seen since World War II," Gasper said.
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Debt is 50% of GDP in emerging markets
In emerging market economies, debt at almost 50% of GDP on average is at levels that in the past have been associated with the fiscal crisis. In contrast, for low-income developing countries, average debt-to-GDP ratios at 44% of GDP are well below historical peaks.
Debt levels
Debt level increases with the completion of HIPC and MDRI
According to Gasper, since the completion of the Heavily Indebted Poor Countries (HIPC) Initiative and Multilateral Debt Relief Initiative (MDRI), the debt levels have been picking up on average. The increase has been about 13% of the GDP in the last five years. Meanwhile, the interest burden has also doubled in the past 10 years to 20% of taxes.
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Debt ratios to decline in three-fifths of low-income developing countries
For the period 2018 to 2023, debt ratios will be declining in three-fifths of low-income developing countries and in about two-thirds of emerging market economies. As for advanced economies, debt ratios will be declining in almost all countries, except the US.
No decline
Why debt ratios won't decline in US?
"In the US, revised tax code and two-year budget agreement provide additional fiscal stimulus to the economy. These measures will give rise to overall deficit above $1 trillion over the next three years and that corresponds to more than 5% of the US GDP," Gasper said. "Debt is projected to increase from 108% in 2017 to 117% of GDP in 2023," he added.