Global countries have been amassing huge debts. Global debts have reached all-time highs, says IMF Chief.
In 2016, global debt was at $164 trillion. But in 2019, it has touched a record high of $188 trillion, says Kristalina Georgieva, quoting IMF figures. Private and public debt has been mounting.
Georgieva says that private sector borrowing forms the vast majority of the total debt. $188 trillion global debt is 230 percent of global output. This is far higher than the $164 trillion debt in 2016.
While speaking at a two-day conference, Georgieva gave data about the vulnerable position that the global debt has put countries into. High debt burdens have tightened financial conditions which in turn have made governments, household and companies vulnerable. It is a drag on growth, she says.
Interest rates are very low and borrowers use it for production and investment purposes. However, it will drag growth, says Georgieva.
She also states that corporate debt forms two-thirds of the global debt, but government debt is also on the rise with the growing financial crisis.
Public debt in the emerging market is touching levels last seen in the debt crisis of 1980. However, public debt in advanced countries is much higher, at levels not touched since the Second World War, warns Georgieva.
Borrowing has to become more sustainable, says the IMF leader. Transparent lending practices and proper debt restructuring have to be brought in, especially with non-traditional lenders. It is believed that the reference was made to China, as it is a major creditor to many developing nations. Transparent lending will curb corporate loans which are rising at an alarming rate, feel analysts.
If there is a sudden financial tightening, it will affect the economies as both government borrowing and corporate debts are spiraling higher. The current low interests will not weather the storm if financial conditions tighten.
Gary has a total experience of 6 years in the field of Technology. He has completed Engineering Degree and is actively involved in the writing field from the last 5 years. He works as the Contributing Author at Market Research 24’s Technology section and believes that a writer is not just a wordsmith and one should enter into the field of writing only if they have a passion to write. With a combination of stronghold on the writing field and giant experience, he easily carries out all the activities skillfully. At the same time, he always gives first preference to the work satisfaction and sees that all team members give 100% to their work.