IIF: "Policymakers must urgently deal with record global debt"

The year 2024 will be "challenging", so policy makers will need to urgently deal with the record level of global debt, according to the Executive Director of the Institute of International Finance (IIF), Tim Adams, who describes the current crisis as a "fiscal problem huge".

Tim Adams, CEO of the IIF, present at the World Economic Forum (WEF) in Davos (Switzerland), sounded the alarm about rising debt levels. The debt issue, however, was largely overshadowed at the WEF's annual meeting, with the expansion of artificial intelligence and conflicts in the Middle East and Ukraine taking up more space on the forum's agenda.

"We have a global debt problem. We have the highest levels of debt from a non-war period in modern history and it's at the corporate, household, sovereign, sub-sovereign level," Adams said, as quoted by CNBC, noting: "We have a huge fiscal problem everywhere, including in the USA. We have a deficit of 7% of GDP. We have to focus on how we are going to put ourselves in fiscal order."

• IIF Estimates: Global Debt - $310 trillion at the end of 2023

The IIF warned late last year that global debt rose to a record $307.4 trillion in the third quarter of 2023, with substantial growth in both high-income and emerging market countries. The IIF said it expects global debt to reach $310 trillion by the end of 2023, warning that elections in more than 50 countries and regions this year could lead to a shift towards populism that brings levels and higher levels of debt.

"I worry about geopolitics every day," Adams said, warning, "I think this is going to be a challenging year."

Asked whether high levels of global public debt matter at a time when major central banks are poised to cut interest rates, Adams said: "It matters, because of demographics. We have aging populations in so many parts of the world, from China to all of Europe to the US and Japan. We need to build this capacity and deal with this huge debt overhang in the future. And this happens in peacetime, so the question is how to do it quickly and in a smart way. We all need to focus on fiscal imbalances."

The 54th annual meeting of the World Economic Forum takes place between January 15-19, 2024 and is held under the theme "Rebuilding Trust". Participants focus on fundamental principles that foster trust, including transparency, consistency and accountability. Representatives from over a hundred governments and major international organizations, 1,000 partners of the Forum, as well as civil society leaders and experts are expected at the meeting.