Global Debt Surges to Nearly 100% of GDP, Threatening Poverty Reduction
Global public debt has surged to nearly 100% of GDP, with the United States and China leading the rapid rise. This alarming trend, exacerbated by the COVID-19 pandemic, threatens to stall poverty reduction and hinder progress towards the UN's Sustainable Development Goals. Tighter budgets and rising food insecurity have already stalled poverty reduction efforts.
The International Monetary Fund (IMF) warns that 39 low-income developing countries are already in or near debt distress. Sixty percent of countries are projected to see their public debt to GDP ratios decline by 2028, but many large economies are seeing rapid debt growth. Among these, the US is expected to reach a debt level of about 128% and China nearly 120% of GDP by 2030.
To combat this, countries must align fiscal and monetary policies and build buffers for crises. Regulators should strengthen crisis management frameworks to avoid the 'doom loop.' Recent banking problems in the US and Switzerland have heightened risks of an expanding financial crisis, which could further pressure public sector balance sheets.
The IMF projects global public debt to remain high, at 99.6% of GDP by 2028. To prevent this from derailing progress on poverty reduction and sustainable development, countries must prioritize reducing debt vulnerabilities, especially in low-income developing nations. Coordinated global efforts are crucial to manage this looming debt crisis.
