World debt soared to record $ 226 trillion in 2020: IMF

The world debt reached a record level of 226 trillion dollars last year, equivalent to 256% of the planet’s GDP, due to the effect of the pandemic, announced this Wednesday the International Monetary Fund.

The rise thus stands at 28% in one year, the highest since the Second World War.

“Credits assumed by governments accounted for just over half of this increase,” reaching a record (99% of world GDP), while “private debt of non-financial companies and families also reached new highs,” detailed Vitor Gaspar and Paulo Medas, responsible for budget affairs at the IMF, and Roberto Perrelli, economist at the IMF.

Government debt is responsible for 40% of this total liability in the world, “the highest part since the mid-1960s,” the authors detail in an article.

The accumulation of this public debt is the direct consequence of two major economic crises: the global financial crisis of 2008 and the coronavirus pandemic.

In 2020 “the sharp increase in debt was justified by the need to protect people’s lives, preserve jobs and avoid a wave of bankruptcies,” the specialists highlighted. “If governments had not acted, the social and economic consequences would have been devastating,” they conclude.

But they also observe that this level of indebtedness amplifies vulnerabilities, in a context that is expected to be less favorable in the future, with increases in interest rates in a context of strong inflation.

“High levels of indebtedness limit, in most cases, the ability of governments to sustain the recovery and the ability of the private sector to invest in the medium term,” adds the Fund.