BY BAMIDELE FAMOOFO
The world recorded the highest debt growth since World War II, as global debt hits $226trillion in 2020; according to the International Monetary Fund (IMF).
“We observed the largest one-year debt surge since World War II, with global debt rising to $226 trillion as the world was hit by a global health crisis and a deep recession. Debt was already elevated going into the crisis, but now governments must navigate a world of record-high public and private debt levels, new virus mutations, and rising inflation,” the IMF said in a report.
Global debt rose by 28 percentage points to 256 percent of GDP, in 2020, according to the latest update of the IMF’s Global Debt Database.
Borrowing by governments accounted for slightly more than half of the increase, as the global public debt ratio jumped to a record 99% of GDP. Private debt from non-financial corporations and households also reached new highs.
Debt increases are particularly striking in advanced economies, where public debt rose from around 70% of GDP, in 2007, to 124% of GDP, in 2020. Private debt, on the other hand, rose at a more moderate pace from 164 to 178% of GDP, in the same period.
According to IMF, Public debt now accounts for almost 40% of total global debt, the highest share since the mid-1960s. The accumulation of public debt since 2007 is largely attributable to the two major economic crises governments has faced—first the global financial crisis, and then the COVID-19 pandemic.
Debt dynamics, however, differ markedly across countries. Advanced economies and China accounted for more than 90% of the $28 trillion debt surge in 2020. These countries were able to expand public and private debt during the pandemic, thanks to low interest rates, the actions of central banks (including large purchases of government debt), and well-developed financial markets. But most developing economies are on the opposite side of the financing divide, facing limited access to funding and often higher borrowing rates.
