January 27, 2023

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Vítor Gaspar, Director of the IMF’s Department of Financial Affairs, described 2021 as “a very unusual year” © James Lawler Duggan/Reuters

According to IMF data released on Monday, global debt as a share of output fell last year by the most in at least 70 years as economies recovered from their sudden slowdown in 2020 and inflation soared jumped.

The ratio of global public and private debt to gross domestic product fell 10 percentage points in 2021 after rising 29 points the year before, according to data from the IMF’s global debt database released on Monday.

The figures show how massive government bailouts of pandemic-stricken economies not only fueled growth but also global inflation on a scale not seen in decades.

Last year’s decline was the sharpest since the IMF’s data series began in 1950 and followed the largest rise since records began a year earlier. It brought global debt to 247 percent of global GDP in 2021, compared to 228 percent of GDP in 2019, the IMF said.

The decline was almost entirely driven by the recovery in growth and rising prices. Together, these two factors caused the debt-to-GDP ratio of the G20 group of the world’s largest economies to fall by 9.5 percentage points.

In dollar terms, the world’s total public and private debt rose slightly to an all-time high of $235 trillion, the fund added. As a percentage of GDP, debt is likely to stabilize in 2023 after another modest decline this year as the global economy slows, the fund said.

Describing 2021 as “a very unusual year,” Vítor Gaspar, Director of the IMF’s Department of Financial Affairs, added: “As we enter 2023, the world outlook will be dominated by the need to tackle high inflation, accompanied by much higher ones real interest rates and reduces risk tolerance, particularly for countries with perceived weaker fundamentals.”