A public debt global economy should continue to increase and reach 100 trillion dollars (560 trillion reais) by the end of the year, equivalent to 93% of world GDP, says the International Monetary Fund (IMF) in its report on budget policy (Fiscal Monitor) published this Tuesday.
In percentage terms there is no increase, as public debt reached 93% in 2023, but the amount of money owed is growing and the trend is not in the process of reversing, laments the Fund, which predicts a level of 100% of GDP by end of the decade.
For comparison purposes, the private debt of families and non-financial companies represented 146% of global GDP at the end of 2023, according to the institution’s data.
“There are very good reasons to believe that the debt burden – or the debt outlook – could be worse than expected,” highlighted Era Dabla-Norris, deputy director of the Public Finance Department at the International Monetary Fund, during a press conference online.
“Experience reminds us that debt projections tend to be very optimistic, either because governments are very optimistic about their growth forecasts or because budget reforms are never fully implemented,” he explained.
If the States had already announced budget adjustments, they would not necessarily stabilize the public debt, much less reduce it, even if they were implemented in full.
This is explained because the debt of some major economies, in particular USA e Chinacontinues to increase and shows no signs of inverting the curve.
To allow for a real reduction in public debt, an adjustment of 3.8% of GDP would be necessary each year until the end of the decade, much higher than the 1% currently predicted.
But a poorly calibrated significant reduction in public spending could have a major impact on growth and lead to an increase in inequalities, as well as in countries’ debt levels.
The IMF has already recalled on several occasions the need for States to rebuild budgetary margins, undermined by successive crises since the Covid-19 pandemic, precisely so that they are able to face the next crises.
At the same time, the institution recognizes the need for States to invest many resources against global warming and the adaptation of societies to mitigate its consequences.
But rising interest rates over the past three years have harmed the public finances of many countries by driving up the cost of credit.
According to the World Bank, almost 40 countries are currently facing a debt crisis or are close to it, in particular due to the significant increase in their debt service.
