WASHINGTON: The impact of COVID-19 caused global public and private debt to reach record highs in 2021, although generally it remained significantly higher than pre-pandemic levels, the International Monetary Fund (IMF) reported on Monday.

The IMF reported that overall public and private debt fell by 10 percentage points to 247% of global gross domestic product in 2021 from its peak of 257% in 2020 in a blog published alongside the publication of its first Global Debt Monitor. Comparatively, that amounts to roughly 195% of GDP in 2007, before to the world financial crisis.

Global debt hit a record $235 trillion last year in dollar terms, though at a far slower rate than before.

The international lender cited statistics from 190 nations and claimed that private debt, which includes non-financial corporate and household commitments, was the main driver of the overall decline, falling by 6 percentage points to 153% of GDP.

According to the report, the public debt decreased by 4 percentage points, from 96% of GDP to 96%, the most in decades.

The "global debt rollercoaster," or exceptionally significant fluctuations in debt ratios, were brought on by the economic recovery following COVID-19 and the ensuing quick rise in inflation, according to the IMF.

Concerns about repayment

Different country groups had wildly different debt patterns. Last year, both public and private debt in advanced economies fell by 5% of GDP, which was followed by comparable figures in emerging markets outside of China.

However, because of rising private debt in 2021, low-income nations saw their total debt ratios continue to rise, with total debt reaching 88% of GDP.

With an estimated 25% of emerging market nations and more than 60% of low-income nations experiencing or about to experience financial distress, there are growing concerns about the ability of low- and middle-income nations to repay their loans.

In a blog post also published on Monday, IMF fiscal affairs chief Vitor Gaspar and two other top economists warned that if the economy's outlook worsened and borrowing costs increased, it would get harder to handle the high levels of debt.

High inflation rates kept debt ratios down in 2022, but if inflation persists, spending will rise and premiums may rise as a result.

Governments, they argued, should seek fiscal measures that lessen current inflationary pressures and long-term debt risks while continuing to assist the most disadvantaged.

They declared, "Confidence in long-term stability is a precious asset in times of instability and unrest."