The sum of all national debts is set to surpass one hundred trillion dollars (1 lakh crore) this year, marking a record for all nations. Moreover, global public debt is projected to grow faster than expected due to a slowdown in economic growth and increased government expenditure.
According to the International Monetary Fund (IMF), reported by Reuters, the public debt of various countries is expected to reach 93 percent of the total global GDP by the end of 2024, potentially hitting 100 percent by 2030. During the COVID-19 pandemic, this debt peaked at 99 percent of GDP, which had been the global record for some time. In 2020, it surged by ten percentage points compared to 2019 as economic activity came to a halt, forcing governments in numerous countries to borrow at exorbitant interest rates to cover their expenses.
The World Bank and the IMF will hold a joint meeting next week. Prior to this, the IMF released its Fiscal Monitor report, which indicated that an increase in U.S. government spending might lead to a rise in global debt.
The IMF’s research highlights increasing fiscal sector uncertainty in various countries, alongside political conflicts regarding tax collection. Changing tax policies is becoming increasingly complex, yet there is pressure to raise government spending for various reasons, including environmental protection, maintaining an aging population, security concerns, and other developmental expenses.
With three weeks remaining until the U.S. election, the nation’s debt is a cause for concern for the IMF. Both Kamala Harris and Donald Trump have promised new tax cuts and spending increases. Trump has pledged to lower corporate taxes again. The U.S. national debt already exceeds the legal threshold, and it is expected to rise further due to these proposed tax breaks and spending increases.
According to the Committee for a Responsible Federal Budget, if Trump is elected and implements the promised tax cuts, the national debt of the United States could increase by 7.5 trillion dollars over the next ten years. In contrast, if Kamala Harris’s proposals are enacted, the debt may rise by less than half that amount, approximately 3.5 trillion dollars.
The Committee also notes that projected national debt figures often underestimate actual debt levels. Historically, the tax-to-GDP ratio is around 10 percent higher than initially forecast over a ten-year period. This discrepancy may arise from cautious projections, slowing growth, tighter credit conditions, and uncertainties in monetary and fiscal policy in both the U.S. and China.
If current trends worsen, the global public debt-to-GDP ratio could rise to 115 percent in the next three years, representing a 20 percentage point increase over current estimates.
Private debt is also increasing alongside government debt. The Institute of International Finance (IIF) predicts that the total amount of public and private debt worldwide will reach a record $313 trillion in 2023. This signifies that global debt has never been this high. According to the IIF report, an additional $15 trillion, or more than $1.5 trillion, was added to the global debt stock last year. Approximately 55 percent of total debt is generated in advanced economies, including the United States, France, and Germany. Debt growth is also evident in developing countries such as China, India, and Brazil.
Source : Prothom Alo
