Nov. 18, 2020–Governments and companies took on an unprecedented level of debt in the first nine months of this year. The total debt rose $15 trillion above 2019, much of it related to the impact the global pandemic, according to the Institute of International Finance.
For perspective, the association estimates that global debt may swell to $277 trillion by the end of 2020. As a share of the global economy, that is 365 percent of GDP, up from 320 percent of GDP in 2019.
Debt Crisis Worse in Poorest, Middle-Income Countries
The news follows a separate report by the International Monetary Fund about extreme debt distress in emerging and developing economies.
“For some, a crisis is imminent,” the IMF report said. “For many more, only exceptionally low global interest rates may be delaying a reckoning.”
The IMF and G20 have provided leniency of debt owed by the poorest countries. However the private lending, which is in retreat, has not, the IMF reported.
Lending By China ‘Shrouded in Nondisclosure Clauses’
What’s especially interesting is that lending by China accounts for an increasing share of the loans. In fact, China has become the largest country-to-county lender in recent years, the IMF found.
“China’s lending is often shrouded in nondisclosure clauses, and a full picture is still elusive,” the IMF report said. The IMF is calling for more transparency in the lending in part “to identify which bonds are at risk of holdout or litigation tactics.”
The fund is also advocating for debt restructurings, which is says are needd to preserve the global trading system and help countries weather debt problems caused by the global pandemic.
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