IMF Warns Of Serious Consequences Of Global Debt Spiral

Spread the love

IMF Projects Global Debt to Cross 113% of GDP

By Raisina Correspondent

New Delhi, October 15: The International Monetary Fund (IMF) has warned of serious consequences of rising global debt. The IMF said that the global debt will exceed $100 trillion this year.

Projecting a grim scenario, the IMF also said that the global public debt could see a sharp spike in the next three years. The fiscal monitor report of the IMF underlined that the global public debt will hit 93 per cent of the GDP by end of 2024.

Also Read: Trump Surge Signals Cliffhanger US presidential polls

The IMF report sized up the global trends of low growth and higher spending. The IMF warned that global public debt could reach 115 per cent in just three years. This will be 20 percentage points higher than currently projected per IMF report released on Tuesday.

The IMF warning has come amid China stepping up measures to stimulate its economy. China is pumping public debt to fund stimulus packages to meet the target of five per cent GDP growth.

The US also is witnessing addition of public debt to keep the economy afloat. Both the US presidential election candidates – Donald Trump and Kamala Harris – are harping on measures which may spike public debt.

The IMF stated that the “US and other countries where debt is projected to keep growing such as Brazil, Britain, France, Italy and South Africa could face costly consequences”.

Also Read: Stock Market Today: China Stimulus Plus Spurs Risk-On

Era Dabla-Norris, deputy fiscal affairs director of the IMF, cautioned that failure to adjust the public debt could trigger cascading effects on the markets. “Postponing adjustment will only mean that a larger correction is needed eventually,” she said.

The IMF official also cautioned that “waiting can also be risky”. “The past experience shows that high debt and lack of credible fiscal plans can trigger adverse market reactions,” said Dabla-Norris, adding that countries may find scope limited to deal with future shocks.

The global economy is still stressed. The global equity markets have been jittery about the prospects of an economic slowdown in the US.

Rising energy costs globally are also adding pressure on countries to pile up on public debt. The IMF recently cautioned Pakistan and Sri Lanka from succumbing to demands for tax cuts.

Join WhatsApp channel of The Raisina Hills