Global debt hits record high, urgent calls for fiscal restraint amid economic pressures

Emerging markets, particularly in China, India, and Mexico, are driving this trend, while mature markets also witness increased indebtedness, notably in the US and Japan. Government spending, fueled by historically high interest rates, has contributed to rising debt levels in mature markets, straining state budgets. While other sectors show some resilience, trade tensions and geopolitical uncertainties pose additional risks, potentially inflating global debt further.

The IIF warns of the potential consequences of escalating trade friction, particularly in response to mass exports of green technology from China. Protectionist measures could lead to price hikes and wider inflation, exacerbated by competition for limited raw materials.

Moreover, changes in EU monetary policy may strengthen the dollar, increasing the burden on non-US borrowers with significant dollar-denominated debts. The IMF echoes concerns about debt burdens, advocating for decisive measures to safeguard sustainable public finances and curb spending.

As more than 50 countries face significant elections in 2024, governments are tempted to pursue populist policies, risking fiscal prudence. The IMF urges policymakers to prioritize long-term goals over short-term voter appeasement, emphasizing the need for fiscal discipline in the face of mounting economic challenges.