Government debt burdens worldwide soared to a record in 2020, but policymakers must continue to provide support to buoy their economies and finance the Covid-19 vaccine rollout, the IMF said Thursday.
“Policymakers will have to strike a balance between providing more short-term support to ensure a solid recovery and keeping debt at a manageable level over the longer term,” the IMF said in its latest Fiscal Monitor report.
Global fiscal support reached nearly $14 trillion last year, up by about $2.2 trillion since October 2020, the International Monetary Fund found.
That spending drove average public debt worldwide to an all-time high, hitting nearly 98 percent of GDP, compared with less than 84 percent in 2019, the IMF said.
But since the economic downturn was slightly less terrible than the IMF had forecast, the debt level, too, ended below the 101 percent level projected in July.
The IMF now sees world growth recovering this year with a 5.5 percent GDP expansion, after contracting 3.5 percent last year.
Despite concerns about rising debt, the Washington-based crisis lender has consistently urged policymakers to continue to provide support until the pandemic is under control, and to especially focus on the hardest-hit sectors and green investments.
“In short, governments need to win the vaccination race, respond (with) flexibility to the changing economic conditions and set the stage for a greener, fairer and more durable recovery,” the fund said.
But access to financing might tighten up, and the IMF stressed it will be “vital” to develop “credible multiyear frameworks for revenue and spending.”