Global Debt at Historic High, China 'Driving Force', Says IMF

World debt hits record $164 trillion as China, US continue to borrow.

Washington, MINA — Global debt is at a historic with a record peak of USD 164 trillion recorded in 2016, that is equivalent to 225 percent of global GDP, KUNA reported, citing the International Monetary Fund (IMF) in its April Fiscal Monitor on Wednesdy.

“The world is now 12 percent of GDP deeper in debt than the previous peak in 2009, with China as a driving force,” it said.

Public debt and government deficits were listed as major contributors to the surge in global debt.

In advanced economies, debt is at 105 percent of GDP on average. In middle-income economies, it is close to 50 percent of GDP on average.

Meanwhile, the US tax cuts approved at the end of 2016 will push US deficit spending to USD 1 trillion or five percent GDP, over the next three years. The US debt will increase to nearly 117 percent by 2023, it said.

Other than the US, all other advanced economies are expected to see their debt to GDP levels decline moderately over the next five years, it said.

For the US, where fiscal stimulus is happening, policy should be recalibrated to ensure that the government debt-to-GDP ratio declines over the medium term.

“Decisive action is needed now to strengthen fiscal buffers, taking full advantage of the cyclical upswing in economic activity,” the report said.

“As growth returns to its potential, fiscal stimulus loses its effectiveness while the cost of fiscal consolidation diminishes, making it easier to switch from fiscal expansion to fiscal consolidation.” . (T/RS5/RS10

Mi’raj Islamic News Agency (MINA)