IMF chief: Global debt surges to record high US$188t

IMF Managing Director Kristalina Georgieva arrives for her first day in her new post at IMF headquarters in Washington October 1, 2019. — Reuters pic
IMF Managing Director Kristalina Georgieva arrives for her first day in her new post at IMF headquarters in Washington October 1, 2019. — Reuters pic

WASHINGTON, Nov 11 — The global debt load has surged to a new all-time record equivalent to more than double the world’s economic output, IMF chief Kristalina Georgieva warned Thursday.

While private sector borrowing accounts for the vast majority of the total, the rise puts governments and individuals at risk if the economy slows, she said.

“Global debt — both public and private — has reached an all-time high of US$188 trillion (RM777 trillion). This amounts to about 230 per cent of world output,” Georgieva said in a speech to open a two-day conference on debt.

That is up from the previous record of US$164 trillion in 2016, according to IMF figures.

While interest rates remain low, borrowers can use debt to make investments in productive activities or weather a bout of low commodity prices.

But it can become “a drag on growth,” she said.

“The bottom line is that high debt burdens have left many governments, companies, and households vulnerable to a sudden tightening of financial conditions,” she cautioned.

Corporate debt accounts for about two thirds of the total but government borrowing has risen as well in the wake of the global financial crisis. 

“Public debt in advanced economies is at levels not seen since the Second World War,” she warned. And “emerging market public debt is at levels last seen during the 1980s debt crisis.”

She called for steps to ensure “borrowing is more sustainable,” including making lending practices more transparent and preparing for debt restructuring with “non-traditional lenders” — an apparent reference to China, which has become a major creditor to developing nations including in Africa. — AFP

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