The International Monetary Fund says US and Chinese debt poses risks to global public finances

Increased interests in the United States are putting pressure on global finances (Reuters/Kevin Lamarque).

The world's largest economic competitors, China and the United StatesDriving much of the increase in global public debt over the next five years, the North American country's spending will create problems for many other countries by keeping interest rates high, according to a World Bank report. International Monetary Fund.

“In both economies, it is expected that under current policies, Public debt will nearly double between now and 2053“Therefore, how these two economies manage their fiscal policies could have profound implications for the global economy and pose significant risks to the fundamental financial outlook in other economies,” the IMF says in its Fiscal Monitor, an overview of the evolution of global public finances.

High interest rates in the United States have been complicating life for many countries ever since It enhances the value of the dollar against other currencies, and makes basic products priced in dollars more expensive It increases the debt burden of countries that borrowed in the American currency.

“High and uncertain interest rates in the United States are affecting the cost of financing in other parts of the world,” Vitor Gaspar, director of finance at the International Monetary Fund, said in an interview. “The impact is very significant.”

The public debt of the two largest economies will double by 2053. - (Illustration)
The public debt of the two largest economies will double by 2053. – (Illustration)

Turning to China, the Fund warned that a larger-than-expected slowdown in China – “likely to be exacerbated by involuntary fiscal tightening given significant fiscal imbalances in local governments” – could slow economic growth. Creating risks for the rest of the world through reduced levels of international tradeFinance and foreign investments.

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The report predicted that the global primary deficit It will fall to 4.9% of global GDP from 5.5% in 2023But with significant risks threatening the public finances of many countries.

The Fund indicated that voters will go to the polls this year in 88 economies, representing more than half of the world's population and gross domestic product, in what it called “the year of the great elections.”

“Support for increased public spending has grown across the political spectrum in recent decades, making this year particularly difficult,” the report notes. “Fiscal policy tends to be more lax, and deviations greater, during election years.”

Aileen Morales

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