Covid-19: Global debt reached record level of $ 226 trillion in 2020, IMF announces

Government debt alone now represents nearly 40% of total world debt, “the highest share since the mid-1960s,” said IMF economists.

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Global debt reached a record level of $ 226 trillion in 2020, or 256% of global gross domestic product, under the effect of the health crisis, the International Monetary Fund (IMF) announced on Wednesday (December 15th). This represents an increase of 28%, the largest since World War II. “Government borrowing accounted for just over half of this increase” also rising to a record (99% of world GDP) while “Private debt of non-financial corporations and households has also reached new highs”, detailed Vitor Gaspar and Paulo Medas, IMF fiscal officers, and Roberto Perrelli, Fund economist, in a blog post (in English).

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Government debt alone now represents nearly 40% of total global debt, “the highest share since the mid-1960s”, they specify.

In 2020, “the sharp increase in debt was justified by the need to protect people’s lives, preserve jobs and avoid a wave of bankruptcies, they point out. If governments had not acted, the social and economic consequences would have been devastating. “

However, they observe that this level of debt amplifies vulnerabilities, especially since financing conditions will be less favorable in the future with interest rate hikes expected in a context of high inflation.

“High debt levels limit, in most cases, the ability of governments to support recovery and the ability of the private sector to invest in the medium term.”, they finally recall.

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