Photo credit: Reuters
As ministers and central bank governors from around the world gather in Washington alongside thinktank and charity bosses to discuss the state of the global economy and its ability to generate a higher standard of living, debt, and why governments need to reduce it, will top the agenda at this week’s annual meetings of the International Monetary Fund and World Bank.
The IMF is expected to argue that the debt mountain is getting out of control. The US and China have borrowed heavily since the financial crash of 2008 to keep to maintain their economies. They returned to the bond markets through the pandemic and more recently to support households and businesses hit by the inflation shock.
The UK and France are among European countries that have done the same thing.
They have all been criticized by the IMF for letting public debts climb to 100% of annual national income.
In countries like the UK, Brazil, France, Italy and South Africa, debt is expected to rise without an attempted effort by ministers to reverse the trend. The IMF says these countries are where the underlying demands for more welfare and health spending could easily spiral.
Although poorer countries tend to have lower debt-to-GDP ratios, they are weighed down by stratospheric interest rates that mean much higher borroweng costs relative to tax income.
As a result, Ajay Banga, World Bank boss, will try to turn the attention of rich countries to the debts of the poorest countries, many of which are struggling to pay their monthly interest bills.
