The global debt is reaching alarming levels and seems to be spiraling out of control according to a report published by the International Monetary Fund (IMF). The debt is expected to surpass $100 trillion in 2024, equivalent to 93% of the global Gross Domestic Product (GDP), and is projected to exceed 100% before the end of the decade. France, with a debt exceeding 110% of its GDP, is among the countries highlighted as having a concerning debt dynamic. The situation is exacerbated by political pressures and the rise of populism, which makes it difficult for governments to implement necessary budget cuts or tax increases to address the issue.
The United States, currently in the midst of a heated election campaign, is facing a significant increase in debt if campaign promises are to be fulfilled. A think tank specializing in budget matters calculated that Donald Trump’s promises could increase the country’s debt by $7.5 trillion over the next decade, while Kamala Harris’s program would add $3.5 trillion. This situation is expected to contribute to a further increase in global debt in the coming years. The weakening economic growth globally is also a contributing factor, as it makes it politically and practically challenging to make necessary adjustments. This leads to lower tax revenues and increased government spending to address economic weaknesses such as purchasing power, unemployment, and restructuring.
The challenges posed by the escalating debt levels are further compounded by the current scenario of very low growth or stagnation in many countries. In France, for example, the economy is experiencing growth rates below 1%, which is unprecedented in times of peace in the last century. Any attempts to reduce debt are now constrained by the need to maintain economic activity, making it a complex dilemma for policymakers. The pressure to address the debt issue is intensifying, but the reluctance of governments to implement unpopular measures such as budget cuts or tax hikes is hindering effective solutions to the problem.
The report by the International Monetary Fund highlights six countries, including the United States, where the debt dynamics are particularly concerning. The combination of political pressures, weakening economic growth, and the impact of campaign promises on debt levels are contributing to a worrying global debt situation. The current global economic scenario is characterized by significant challenges, with no easy solutions in sight. As governments grapple with the dilemma of addressing the debt issue without stifling economic growth, the future remains uncertain. It is imperative for policymakers to navigate this challenging landscape carefully and implement strategies that balance the need for fiscal responsibility with the imperative of supporting economic activity.
