The International Monetary Fund (IMF) has expressed worries regarding world’s continuously growing debt pile. According to IMF’s claims, the gross debt in the non-financial sector has more than doubled in 16 years, and reached record highs of $152 trillion in 2015. This debt is a sum of debt held by governments, non-financial firms and households.
IMF fiscal chief Vitor Gaspar said, “Excessive private debt is a major headwind against the global recovery and a risk to financial stability… History has taught us that it is very easy to underestimate the risks associated with private debt during the upswing.”
After the financial crisis of 2008, countries have been straggling with unstable political climates, no or very slow income growth and rise in income inequality. In turn, such developments caused populist nativism ideologies to become more mainstream, which of course hurts global growth even more.
The IMF warned in its global financial stability report, “These developments make it even harder to tackle legacy problems, further expose economies and markets to shocks, and raise the risk of a gradual slide into economic and financial stagnation. In such a state, financial institutions struggle to sustain healthy balance sheets, which weakens economic growth and financial stability.”