Countries with high debt levels must ‘calibrate’ their spending, according to the IMF.
Following a spike in debt loads last year as a result of the pandemic, governments must now “calibrate” spending, according to the IMF.
According to the IMF’s Fiscal Monitor report, global debt in 2020 “jumped by 14 percent to a record high $226 trillion,” encompassing governmental and private borrowing.
“A large number of countries are in or near debt difficulty,” said Vitor Gaspar, director of the IMF’s Fiscal Affairs Department.
He told reporters that progress on a framework to assist those nations at danger is “essential,” citing the International Monetary Fund and World Bank’s request for action before the Group of 20’s debt service suspension scheme ends at the end of the year.
“While acknowledging that the international community has offered significant support to ease budgetary vulnerabilities in low-income countries,” he stated, “far more is required.”
According to the research, public debt stands at $88 trillion, or about 100% of GDP, and is only anticipated to drop gradually, but there is a risk that excess private debt will become public debt.
“Countries will have to tailor budgetary measures to their own circumstances,” Gaspar explained.
Massive public support helped to mitigate the financial and health effects of the pandemic.
If fully implemented, massive aid programs in the United States and Europe “may add a combined $4.6 trillion to global GDP between 2021 and 2026,” according to Gaspar.
With advances in managing the virus, advanced economies are moving their investment away from the immediate crisis and into green and digital initiatives, as well as efforts to “make economies more inclusive.”
He pointed out that US budget ideas, for example, “seek to reduce inequality and might eliminate poverty by about one-third.”
Emerging economies and low-income developing countries, on the other hand, “have a more challenging picture” with “long-term negative consequences,” since dwindling tax revenues as a result of the prolonged crisis will leave less opportunity for development, he warned.