The global public debt would exceed 100% of GDP by 2029, reaching the highest level since 1948 and continuing the ascending tendency, the IMF appreciated, asking states to strengthen their capital reserves to protect themselves against economic risks.
The IMF warns that the global debt will reach the highest level of 1948 in a few anifoto archive
The extremely uncertain prospects make the fiscal reforms more important than ever, and the International Monetary Fund (IMF) requires both advanced economies and developing countries, reducing their levels, deficits, and strengthening their capital reserves, said the director of the IMF Tax Department, Vitor Gaspar.
In the latest tax monitor, the IMF points out that rich countries already have a level of public debt of over 100% of GDP, or would exceed this level, including the United States, Canada, China, France, Italy, Japan and the United Kingdom.
By 2029, the global public debt would exceed 100% of GDP, reaching the highest level since 1948 and continuing the upward trend, the IMF appreciated, asking states to strengthen their capital reserves to protect themselves against economic risks.
The IMF official explained that by the end of the decade the level of global public debt could reach 123% of GDP, “in the case of an adverse but plausible” scenario, close to the record level of 132% of GDP after World War II.
“From our point of view, the most worrying situation would be the one in which there would be financial turbulence “said in a Vitorul Gaspar interview, citing Tuesday's report of the IMF in which it was shown that financial markets get too used to risks, such as commercial wars, geopolitical tensions and extended government deficits that, combined with already overvalued assets, increase the chances of a correction “disorderly“of markets.
These developments could lead to a fiscal-financial descending spiral, similar to the one that appeared during the Sovereign debt crisis, which started in 2010, Gaspar said.
“There are significant risks to the horizon, it is important to be prepared, and the preparations require capital reserves, which will allow the authorities to respond to severe shocks, in the event of a financial crisis. The IMF research shows that countries with more tax space can better limit the negative effects to the labor market and the economy, in the event of severe shocks, combined with a financial crisis“Gaspar said.
Loans are now much more expensive than in the period between the global financial crisis of 2008 and the pandemic that started in 2020. Interest increase puts pressure on budgets, at a time when needs, against the background of geopolitical tensions, extreme weather phenomena and aging population, says the IMF official.
He added: “Although we recognize that the tax equation is difficult to introduce by politicians, now it is time to prepare, there are necessary targeted measures for expenses allocated in the field of education and infrastructure, to increase GDP. “
Allocating only a percentage point of GDP compared to the current level of expenses to education and other investments in human capital, the GDP could increase by more than 3% by 2050 in advanced economies, and almost double in emerging and developing countries, according to the IMF.
