Washington | The public debt in the world will climb this year to a level unprecedented in the history to represent 101,5% of global GDP, more than at the end of the Second world War, emphasise officials of the international monetary Fund, in a blog post published Friday
So far, Gita Gopinath, and Vitor Gaspar, respectively, chief economist and director of the department of public finance, feel that governments should avoid reducing too early in their expenditure in favour of their economy may otherwise jeopardize the recovery.
“While the trajectory of the public debt could continue to drift in a worst case scenario, a fiscal tightening too early poses a far greater risk of derailing the recovery, with fiscal costs in the future are more important “, they write.
They emphasize that the equation is difficult, since it is for governments to stimulate and sustain their economy laid low by the health crisis, but their debt becomes unbearable.
They invite as well to the budget expenditure as the pandemic is not over, while taking note of the uncertainty surrounding the ability of countries to restore debt levels manageable.
In total, the government spent nearly $ 11 000 billion in aid to the households and businesses affected by the economic paralysis resulting from the confinement decreed to contain the new coronavirus.
For the moment, “a number of governments are taking advantage of borrowing costs that are at record lows” and interest rates should remain at these levels ” for a long time “, as noted by officials of the institution of Washington.
“As the economies are expected to shift below their potential for some time, inflationary pressures will remain moderate, as is the need for the central banks to raise interest rates “, note they.
The Fund anticipates a stabilisation of public debt in the world by 2021, with the exception of the United States and China. But caution is in order.
“There is a diversity in the levels of debt and the financial capabilities across countries “, comment on-they.
And the uncertainty surrounding the economic projections is still large.
The interest rates could increase rapidly, particularly in emerging economies.
They add that it will be yet essential to find the path back to budget balance sustainable in the countries that entered this crisis with debt already high and a low level of growth “, including the developed countries.
In the medium term, they call on governments to pursue ” a budget plan credible “.
It might be based on a better mobilization of their incomes, “including reducing the maximum tax evasion,” or introducing higher taxes on carbon.
Another idea put forward: the reduction of expenditures, including removing subsidies to fossil fuels, the IMF is advocating, like many actors in favour of the environment, an economic recovery is ” green “.