Global Debt Financial News

In the first half of 2023, global debt increased by $10 trillion, reigniting concerns about its impact on the world economy and the potential for a financial crisis, according to data released by the Institute of International Finance (IIF) on Tuesday. 

By Rodrigo Campos

The IMF said in an update to its Global Debt Database that the world's total debt to-GDP ratio fell last year to 238% from 248% in 2021 and 258% in 2020. But the decline for the past two years, driven by strong growth and stronger-than-expected inflation, has recouped only about two thirds of the COVID-induced spike in global debt. The ratio remains well above the 2019 level of 238% of GDP.China has played a central role in increasing global debt in recent decades as borrowing outpaced economic growth, and its debt burden has defied the moderating trend, growing to 272% of GDP in 2022 from 265% in 2021. Those levels are similar to the United States, which saw its total debt-to-GDP ratio fall to 274% in 2022 from 284% in 2021, according to the IMF report. The world has been on a debt «rollercoaster» for three years, but debt is likely to rise again over the medium-term, and the IMF urged governments to adopt strategies to help reduce debt vulnerabilities — both in public debt, household debt and non-financial corporate debt. «The rebound of real GDP growth is fading.

climate change to create a multifaceted crisis. Addressing this demands a coordinated but customized approach to debt restructuring tailored to the unique circumstances of each nation’s debt structure. At the Voice of the Global South Summit, Prime Minister Narendra Modi in January 2023 stated, “As India begins its G20 presidency this year, it is natural that our aim is to amplify the Voice of the Global South." Reflecting this aim and guided by the theme of ‘One Earth, One Family, One Future,’ managing global debt vulnerabilities was adopted as a key priority of the Indian presidency.

Multilateral development banks (MDBs) are facing increasing demands from donor and borrowing countries to expand their lending operations beyond their core development mandates. An independent expert group, steered by finance commission chairman NK Singh and former US treasury secretary Lawrence Summers, formed to examine ways to strengthen MDBs has recommended tackling global challenges alongside core MDB missions of poverty reduction, tripling the sustainable lending level by 2030 and improving capital adequacy for MDBs by infusing funds.

Finance Minister Nirmala Sitharaman on Tuesday met her Chinese counterpart Liu Kun and discussed various deliverables under G20 India Presidency, including strengthening Multilateral Development Banks and global debt vulnerabilities. Both ministers met on the sidelines of the ongoing 3rd G20 Finance Minister and Central Bank Governors (FMCBG) meeting and discussed the state of their economies, inflation, trade and recognised the importance of a good business environment for economic growth and development.

The global debt pile grew by $8.3 trillion in the first quarter to a near-record high of $305 trillion as the global economy faced a «crisis of adaptation» to rapid monetary policy tightening by central banks, according to a closely-watched report from the Institute of International Finance.

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