By Era Dabla-Norris and Davide Furceri
Global public debt could increase to 100 percent of global gross domestic product by the end of the decade if current trends continue, according to projections in our latest Fiscal Monitor. The rising ratio of public debt to GDP reflects renewed economic pressures as well as the consequences of pandemic-related fiscal support, according to our report. This trend raises fresh concerns about long-term fiscal sustainability as many countries face rising budget challenges.
The Chart of the Week shows that about a third of countries, accounting for 80 percent of global GDP, have public debt that’s both higher than it was before the pandemic and rising at a faster pace. More than two-thirds of the 175 economies in our study now have heavier public debt burdens than before COVID spread in 2020.
Public debt’s evolution over the past five years diverges widely across countries, which means fiscal policy must vary in line with country‑specific factors and circumstances. However, given the uncertain times that may lie ahead amid high trade policy tensions, countries everywhere will need much greater resilience.
Specifically, fiscal policy should:
- Be part of overall stability‑oriented macroeconomic policies.
- Aim, in most countries, at reducing public debt and rebuilding capacity to spend and respond to new pressures and other economic shocks with a credible medium‑term framework.
- Lift potential growth to ease policy tradeoffs. Amid uncertainty, fiscal policy must anchor confidence and stability for economies to deliver growth and prosperity.
It’s increasingly vital for governments to build trust, tax fairly, and spend wisely. Policymakers should devote their political capital to fostering confidence and trust. Doing so starts with redoubling their efforts to keep their own fiscal houses in order.
— For more, see the Fiscal Affairs Department’s April 23 blog post and press briefing.
The authors are all senior managers at the IMF. This article was originally posted here.
4 Comments
Jesus, this is awful. I can't believe people get paid to spout this gibberish.
I can't disagree that 'It’s increasingly vital for governments to build trust, tax fairly, and spend wisely.' Our societies well being is absolutely dependent on these things. Civilization is not inevitable.
IMO NZ is on a path to increasing indebtedness, and a slowly over decades failing social safety net with likely decreasing insufficient support for heath, education and the rule of law. In my parents and grandparents day there were improvements in the standard of living and social equity due to the introduction of the welfare state, free education, the 40 hour week, electrification, mechanization, cars instead of horses, diesel/ electric locomotives instead of steam, automation advances in factories, new and better vaccines, antibiotics, valve radios, TV, landline telephones, refrigerators, washing machines . In my own lifetime the invention of the transistor, semiconductors and integrated circuits bring PC's and the internet, MRNA vaccines, huge improvements in life saving cancer treatments, safer birthing for women and many more advances. These benefits have raised our standards of living but also happening was and is insidious gradual environment declines, invasive pests and more weeds, polluted waterways, accelerated species extinctions when combined with rising temperatures new diseases and increased risks to life and health.
Governments can increase trust by being open and honest about our infrastructure, our collective education and skills, income, debt, housing, population, immigration, transportation, farming, horticultural and industrial production, resource extraction and more and acknowledge and face our current and future predicament (living is always precarious) by making and implementing plans arrived at through collective decision making and solve problems, or most of us descend into impoverishment associated with corruption, inequitable taxation and the breakdown of the social institutions and community relationships that help maintain social cohesion.
Damien Grant: There’s no path to electoral power that can accommodate running a balanced budget
https://www.stuff.co.nz/politics/360707344/damien-grant-theres-no-path-…
Damien pretty much nails it, but I disagree that 'And that appears to be the problem. Democracy. The change occurred about two decades back, in the west, when the constituency for fiscal responsibility was lost. This isn’t political because it doesn’t matter who is in charge."
Essentially it depends on electors judgements. I think that democracy can solve the problem by one or both of 2 ways:
1 Eventually if democracy survives long enough when widespread impoverishment forces electors to choose politicians who are willing to cut the cloth to fit (IMO the likely pathway).
2 A remarkable series of leaderships that act for the common good emerges that undertakes actions that lead towards increasingly balanced budgets, against their electors sentiments, even though this leads to their short term or permanent electoral demise.
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