WASHINGTON, United States (AFP) — As governments rushed out funding to prevent an economic collapse amid the novel coronavirus pandemic, global public debt swelled to the highest in history, but the International Monetary Fund (IMF) warned Friday that cutting back too soon could undermine the recovery.
Continuing to provide the support as the economic slowdown drags on will be “paramount,” the International Monetary Fund’s fiscal policy chief Vitor Gaspar told AFP in an interview.
“The risk of premature withdrawal of fiscal support is the dominant risk,” even more than rising debt levels, Gaspar said, noting that the economic recovery from the global financial crisis was slowed by that misstep.
As the health crisis spread and businesses were shuttered worldwide to contain the spread of COVID-19, governments provided “a massive fiscal response” of close to US$11 trillion in just a few months to help support households and prevent bankruptcies, a “stronger and faster” response than in 2008-2010.
As a result, even amid record-low interest rates, the debt figures are staggering.
Global public debt will reach “its highest level ̶ as a percentage of GDP [gross domestic product] ̶ ever recorded in history”, at over 100 per cent of global GDP, Gaspar said.
Deficits in advanced economies are projected to be five times higher than pre-pandemic estimates for 2020.
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