After two years of decline, thanks in particular to the economic recovery and inflation, the public debt of States should increase worldwide in the medium term to return in 2028 to the levels observed during the pandemic if nothing is done, warned the IMF on Wednesday. . This is at least the conclusion of the report on budgetary policies, the Fiscal Monitor, published by the International Monetary Fund (IMF).
“We have seen a marked adjustment in the debt ratio after the increase observed in 2020, thanks to the reopening of the economy and the strong recovery observed but also thanks to inflation, because it was unexpected, which has contributed to temporarily increasing tax collection ,” Vitor Gaspar, director of the fund’s budget affairs department, told AFP.
“100% of GDP”
“But we see a stabilization in the fall in public deficits and even a reversal of the debt, which rises again in 2023. The consequence is that the level of debt in 2028 should return to close to 100% of GDP”, level reached during the pandemic, he added.
This is a rise in the debt ratio of most developed and emerging countries, with the notable exception of the euro zone. China and the United States are especially concerned, since their debt to GDP ratio should reach 100% and 135% respectively in 5 years, levels never seen before for the two countries. For China, this will even represent a doubling of its pre-pandemic debt level, the IMF noted.
An increase concentrated in a handful of countries
The first two economic powers will also account for most of the accumulated increase by 2028, highlighting the IMF that once these two countries are not taken into account, the global debt ratio will instead decrease.
Thus, in the case of the United States, “we observe a fairly rapid and persistent increase in debt. It is true that they benefit from Treasuries being seen as the safest assets on the financial market. But we believe that an adjustment of its budgetary policy is necessary”, detailed Vitor Gaspar.
The world’s biggest powerhouse’s debt is currently the subject of a congressional standoff as the country hit its $31.4 trillion ceiling in January and could risk default next summer if a deal is not reached. an agreement between republicans and democrats.
Source: BFM TV
