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Update on the great public debt issue

Update on the great public debt issue

The latest IMF fiscal monitor is a stark reminder of the public finance risks in the world. Public debt ratios have remained stuck near record highs of 105% of GDP for the developed world and a 3-decade high of 50% for EM countries. If one includes contingent liabilities public debt would average over 200% of GDP in advanced economies and 112% in emerging economies. Deficits remain sizeable in the developed and emerging world, notwithstanding the mature stage of the business cycle. Overall the financial position of governments today is a lot more precarious than during past recoveries, leaving them ill prepared for future adverse shocks. The U.S. is even easing fiscal policy, expanding its deficit and an already high debt ratio. Also, China’s public debt stock is expected to rise rapidly in future years