•Says debt stands at $235trn
By Chinwendu Obienyi
The International Monetary Fund (IMF) has raised concerns over the state of global debt, particularly in low-income developing countries (LIDCs), stating that global debt currently stands at $235 trillion.
TheFund disclosed this in its 2023 Global Debt Monitor report on the state of global debt titled; Global debt is returning to its rising trend which was published recently. It noted that while the global debt of $235 trillion is a decline of 20 per cent in the last two years, global debt still constitutes around 92 per cent of global GDP- a decline of 3.6 per cent in the last year.
The institution also warned that global debt might be on a rising trend in the medium term as the macroeconomic conditions that provided great relief to debt ratios in 2021-2022 will not last.It added that the rebound of real GDP growth is fading as inflation is projected to stabilise at a low level over the medium term (July 2023 WEO Update). According to the IMF, if global debt resumes its rising trend going forward, the debt rollercoaster since the pandemic will look nothing more than a temporary deviation around its long-term rising trend.
It said that global debt fell by 10 per cent about $200 billion to now represent 238 per cent of global GDP, for low-income developing countries it increased by 0.5 per cent and now makes up 88 per cent of their GDP.
IMF said,“Debt in low-income developing countries (LIDCs) have not fallen. Total debt increased by about 0.5 per cent of GDP to 88 per cent of GDP in 2022. This was driven by a similar increase in private debt, which reached a new high of 39 per cent of GDP in 2022.”
The Fund noted that in low-income developing countries, the debt burden has been exacerbated by the exchange rate depreciation and the need to finance the cost-of-living crisis caused by the pandemic and other geopolitical events globally.
The IMF further warned that unless developing countries improve their tax capacity and revenue mobilization capacity, they will find it difficult to manage their debt even with a relatively low debt profile.
The report said, “LIDCs, in particular, may face greater challenges in managing debt vulnerabilities even at relatively low debt levels. In 2022, LIDCs spent 23 per cent of tax revenues on average just to make interest payments, as their tax revenues have remained stagnant while debt burdens have risen. Improving tax capacity and revenue mobilization should be a key priority to restore fiscal sustainability.”