![]() ![]() “A significant tightening of financial conditions would heighten the pressure on the most highly indebted governments, households, and firms. “The risks will be magnified if global interest rates rise faster than expected and growth falters,” the officials wrote. As interest rates rise, IMF officials warn that higher interest rates will diminish the impact of fiscal spending, and cause debt sustainability concerns to intensify. Global debt reached $226 trillion by the end of 2020, seeing the biggest one-year increase since World War II.īorrowing by governments accounted for slightly over half of the $28 trillion increase, bringing global public debt ratio to a record of 99% of GDP. Wealthier countries are borrowing to launch fiscal stimulus packages while low and middle income countries cannot afford such measures, potentially resulting in wider global inequality. This crisis is hitting poor and middle-income countries harder than rich countries. Also, 30 countries in the developing world have high levels of debt distress, meaning they’re experiencing great difficulties in servicing their debt. A report from the International Monetary Fund (IMF) shows that at least 100 countries will have to reduce expenditures on health, education, and social protection. The World Bank published a study showing that countries that maintained a debt-to-GDP ratio of over 77% for prolonged periods of time experienced economic slowdowns.ĬOVID-19 has worsened a debt crisis that has been brewing since the 2008 global recession. Generally, the higher a country’s debt-to-GDP ratio is, the higher chance that country could default on its debt, therefore creating a financial panic in the markets. What is the main risk of a high debt-to-GDP ratio?Ī rapid increase in government debt is a major cause for concern. In order to finance new debt, the Japanese government issues bonds which get bought up primarily by the Bank of Japan.īy the end of 2020, the Bank of Japan owned 45% of government debt outstanding. In 2010, it became the first country to reach a debt-to-GDP ratio 200%, and it now sits at 257%. Japan’s debt level won’t come as a surprise to most. Japan, Sudan, and Greece top the list with debt-to-GDP ratios well above 200%, followed by Eritrea (175%), Cape Verde (160%), and Italy (154%). Source: World Economic Outlook Report (October 2021 Edition) Let’s take a look at the top 10 countries in terms of debt-to-GDP: By comparing how much a country owes and how much it produces in a year, economists can measure a country’s theoretical ability to pay off its debt. The debt-to-GDP ratio is a simple metric that compares a country’s public debt to its economic output. Global Debt by Country: The Top 10 Most Indebted Nations To analyze the extent of global debt, we’ve compiled debt-to-GDP data by country from the most recent World Economic Outlook report by the IMF. Countries have taken on new debt to provide financial support for these measures, which has resulted in the highest global debt levels in half a century. ![]() In order to help with this difficult situation, global governments have had to increase their expenditures to deal with higher healthcare costs, unemployment, food insecurity, and to help businesses to survive. The World Bank has estimated that almost 97 million people have been pushed into extreme poverty as a result of the pandemic. ![]() Since COVID-19 started its spread around the world in 2020, the global economy has been put to the test with supply chain disruptions, price volatility for commodities, challenges in the job market, and declining income from tourism. Visualizing the State of Global Debt, by Country ![]()
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