IMF urges governments to tackle record global debt of $152 trillion

The Dollar Business Bureau

The International Monetary Fund (IMF) has expressed concern over the mounting level of global debts, which has already reached a record $152 trillion, thereby generating fresh risk of global economic and financial crisis.

Cautioning that the debt level was on a continuous rise, the IMF exhorted the governments to stimulate growth through investments, fiscal and business reforms, and targeted measures to mitigate the probable global economic risks; ones that paralysed the world financial and economic system during the 2008-09 periods.

"For a significant deleveraging to take place, restoring robust growth and returning to normal levels of inflation is necessary," it said.

It noted in its half-yearly fiscal monitor research, covering 113 countries that global debt currently accounted for 225% of global GDP, in which the private sector contributed for almost two-thirds.

“$152tn is a record high. In places around the world we have excessive debt. In some places we have debt, in particular non-financial corporations’ debt, growing very fast,” said Vitor Gaspar, Director, IMF’s fiscal affairs department.

“A crucial message from the fiscal monitor is that when private debt is on an unsustainable path it is important to intervene early on in the process to make sure financial crisis and recessions can be prevented,” he said.

Gaspar said debt was unevenly spread and concentrated more in the advanced economies and some of the big emerging market economies such as China.

The institution attributed several factors including the policies of the world's top central banks as the reason for escalating a private-sector credit binge in China and rising public debt in some low-income countries.

According to the IMF report, the overall debt level has not come down since the 2007-09 financial crisis due to a weak economic growth post-recession across the major economies. It also expressed concerns about a constant growth in China’s private sector debt to GDP ratio, which has gone up 70 percentage points between 2008 and 2015.