Global public debt soars to $97T in 2023

MOSCOW

Global public debt climbed by 5.4% in 2023 to $97 trillion, with the US being the most indebted country with approximately $33 trillion of public debt, according to data from the International Monetary Fund (IMF).

Many governments around the world introduced large-scale fiscal stimulus programs to protect the labor market and to prevent bankruptcies after the COVID-19 pandemic, primarily to support health care and employment, all of which have led to borrowing.

Low interest rates played a significant role in government borrowing, especially for developed countries where increased spending on health care and pensions for senior citizens put pressure on budgets, which resulted in more borrowing to cover for these costs.

The Russia-Ukraine war also put upward pressure on global energy prices, with many countries intensifying subsidies to avoid passing on the energy costs to citizens.

In the wake of these developments, global public debt, which stood at $74 trillion in 2019 before the pandemic, went up by 32.8% in 2023 compared to the 2019 level and increased by 5.4% year-on-year, reaching $97 trillion as of November, according to IMF data.

US debt makes up 32% of global public debt

The US government passed large-scale spending bills to combat the pandemic, which also caused its economy to slow down, and the Russia-Ukraine war was another factor that had a negative impact on US public debt.

The war also caused changes in the global energy equation and led to significant increases in oil and natural gas prices, resulting in higher inflation.

Given these events, the US stands out as the country with the highest debt worldwide, with its public debt reaching $33 trillion in 2023, up by 10% compared to last year and accounting for 32% of global public debt.

Michael Peterson, executive director of the Peter G. Peterson Foundation, an institution that addresses long-term fiscal challenges in the US, spoke on the issue in a press release on Sept. 18, saying: “As lawmakers drift from one short-term fiscal crisis to the next, our national debt just keeps piling up, trillion after trillion.

“Instead of partisan fights that don’t address our true fiscal problems, Americans want policymakers to focus on the underlying issue of the debt itself.”

Japan's public debt to GDP ratio at 255%

The Chinese government has been spending heavily on infrastructure and socio-economic programs, which increased its borrowing in recent years as the Bank of China kept its interest rates low to stimulate the economy.

Despite steady growth in the Chinese economy and an increase in tax revenues, the country’s public debt is still considered to be at a manageable level.

In view of these developments, China is the second most indebted country after the US, with public debt reaching $17.2 trillion as of October 2023.

As for Japan, its aging population, the rising costs of sustaining them and a decline in the young taxpaying population are cited as the main reasons for the country’s high public debt to GDP ratio.

Japan ranks behind the US and China with a public debt of $11 trillion, while its debt to gross domestic product (GDP) ratio is 255%, making it the clear leader in this regard.

BM calls for reform of international financial architecture

As global public debt rises rapidly, a July 12 report published by the United Nations warned about this increase.

The report said that “3.3 billion people now live in countries where debt interest payments are greater than expenditure on health or education.”

Calling for “comprehensive reform” of the international financial architecture, it added that “it is alarming that some governments are compelled to spend more on servicing debt than on critical sectors like health and education.”

*Writing by Emir Yildirim