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(ADOBE STOCK/LUIGI BERTELLO PHOTO)
Global debt remained above pre-pandemic levels in 2021 even after posting the steepest decline in 70 years, new IMF research shows.
The ratio of global public and private debt to GDP fell 10 percentage points in 2021 after surging by 29 points in the previous year, the IMF’s Vitor Gaspar, Paulo Medas, and Roberto Perrelli write in a blog on the latest update of the IMF’s global debt database.
The IMF’s database—which is the most comprehensive source of public and private debt data in the world—shows that in dollar terms, global debt has continued to rise, albeit at a much slower rate, reaching a record $235 trillion last year.Â
“The unusually large swings in debt ratios are caused by the economic rebound from Covid-19 and the swift rise in inflation that has followed," the authors say.
The Global Debt Database and the Global Debt Monitor were launched at a virtual roundtable discussion where panelists probed what the findings mean for fiscal policy, particularly in poorer nations.
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Why Countries Must Cooperate on Carbon Prices
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Countries that are most vulnerable to climate change—and the associated loss of natural biodiversity—are often those least able to afford investment to strengthen resilience because their budgets are burdened by debt.
Debt-for-climate swaps and debt-for-nature swaps seek to free up fiscal resources so that governments can improve resilience without triggering a fiscal crisis or sacrificing spending on other development priorities. Creditors provide debt relief in return for a government commitment to, say, decarbonize the economy, invest in climate-resilient infrastructure, or protect biodiverse forests or reefs.
Writing in a blog published on finance day of the United Nation’s Biodiversity Conference in Montreal, IMF Managing Director Kristalina Georgieva says for swaps to really have an impact, the number and size of transactions must be scaled up significantly.
“They can be scaled up to complement existing instruments and strengthen resilience in countries on the front line of climate change and loss of natural biodiversity at a time when financing is scarce.”
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Resilience and Sustainability Trust
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(IMF PHOTO/KIM HAUGHTON)
Three months ago the IMF launched a fund to support vulnerable countries overcome long-term challenges to their economies, including climate change. Already Barbados, Costa Rica and most recently Rwanda have reached agreements to tap the new Resilience and Sustainability Trust for millions of dollars and other countries are expected to follow.
Speaking in Washington alongside the leaders of Barbados and Rwanda, the IMF’s managing director said it was of paramount importance to reform the Fund and a create new instrument to support vulnerable countries.
“Climate shocks undermine macroeconomic stability, undermine our ability to support countries to grow and improve the lives and livelihoods of people,” Kristalina Georgieva said.
Mia Mottley, the prime minister of Barbados, said economic development and climate resilience should be part of the same conversation and countries require long-term capital to address these challenges.
“The IMF has done its part. We now need other institutions to extend their timelines for development capital.”
Rwanda’s president, Paul Kagame, said African economies were still struggling with the aftermath of the pandemic and the IMF’s new fund could attract more long-term financing. Â
“If we can demonstrate that this works and works well, then I think more partners may need to step in and make their contributions.”
đź“ş Watch a video of the discussion, also featuring Ngozi Okonjo-Iweala, Director-General of the World Trade Organization and Makhtar Diop, Managing Director of the International Finance Corporation.
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(SURKOVDIMITRI/ISTOCK)
As Europe contends with the cold winter months, governments face difficult policy choices as they seek to protect consumers from soaring energy bills in an environment of generally high inflation, write the IMF’s Oya Celasun and Dora Iakova in the December issue of F&D Magazine.
They estimate that high energy prices have raised the cost of living for the average European household by about 7 percent this year relative to early 2021—adding to inflationary pressures from disruptions to food shipments and supply chains
“With energy prices projected to remain higher than prewar levels for some time, Europe’s policy emphasis must shift rapidly from price-suppressing measures to income relief targeted to the vulnerable.”
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The Scramble for Energy—F&D December 2022
Our latest edition of F&D Magazine focuses on what geopolitical tensions mean for the clean transition. Authors include: Fatih Birol, Daniel Yergin, Ricardo Hausmann, Ted Nordhaus, Thijs Van de Graaf, Andrea Pescatori, Jeromin Zettelmeyer, Oya Celasun, Jason Bordoff, Edward Glaeser, Ratna Sahay, and many more.
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