Global public debt exceeds 100 trillion dollars
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In the “Financial Oversight” report of the International Monetary Fund, which was published a week before the annual meeting of the Fund and the World Bank in Washington, it is stated that there are good reasons to believe that Future debt levels could be much higher than currently forecast, including the propensity to spend and consume more in America, the world’s largest economy.
In this report, the International Monetary Fund says that the uncertainty of fiscal policies has increased and political red lines in tax calculations have become more entrenched; While pressures to address the green energy transition, aging population, security concerns and long-term development challenges are mounting.
The International Monetary Fund’s concern about rising debt levels comes three weeks before the US presidential election, when both candidates have promised new tax breaks and spending that could Add thousands of billions of dollars to the federal budget deficit.
According to estimates by the Committee on a Responsible Federal Budget (CRFB), a budget think tank, Republican presidential candidate Donald Trump’s tax cut plans will create about $7.5 trillion in new debt. will add to US and world debt over 10 years, which is more than double the $3.5 trillion that came from Kamala Harris‘s plans Democrats have been added.
The report shows that debt projections tend to underestimate actual outcomes by significant margins of error, with the actual debt-to-GDP ratio over the next five years averaging 10% higher than originally forecast. . Debt could increase significantly with weaker growth, tighter financing conditions and greater uncertainty in fiscal and monetary policies in major economies such as the US and China. The report includes a “very adverse scenario” including these factors, which suggests that global public debt could reach 115 percent in just three years, 20 percent more than currently projected.
The International Monetary Fund reiterated its calls for further fiscal consolidation, saying the current environment of strong economic growth and low unemployment is the right time to do so. But it announced that current efforts, averaging 1 percent of GDP over the six years from 2023 to 2029, are not enough to reduce or stabilize debt.
To achieve this goal, a collective fiscal contraction of 3.8 percent is required, but in the US, China and other countries where GDP is not expected to stabilize, fiscal contractions A higher amount is needed.
According to the Congressional Budget Office report, the US is expected this month to report a 2024 fiscal deficit of about $1.8 trillion, or more than 6.5 percent of GDP. The statement said that the US and other countries whose debt is expected to continue to grow, including Brazil, Britain, France, Italy and South Africa, could face costly consequences.
In this report, Era Dabella is quoted. Norris, Deputy Director of Financial Affairs of the International Monetary Fund said that delaying the debt adjustment only means that eventually a bigger correction will be needed and the expectation It can be risky, as past experience shows that high debt and lack of credible financial plans can cause adverse market reactions and limit the space countries have to deal with future shocks.
He said cuts in public investment or social spending have a much greater negative impact on economic growth than more weakly targeted subsidies such as fuel subsidies. Dabella Norris said some countries have room to expand their tax bases and improve tax collection efficiency. have, while others can develop their tax systems more effectively by applying taxes on capital gains and income.
