A recently published report by the Institute of International Finance reveals that the world’s collective debt has soared to an unprecedented $307 trillion in the second quarter of the year. This surge in global debt comes as the global economy grapples with the challenges posed by swift monetary policy tightening enacted by central banks.
Despite the fact that rising interest rates have curtailed bank credit in some markets, the Institute of International Finance (IIF) points out that countries such as the United States and Japan have been major drivers behind this increase in global debt.
To put this figure in perspective, the current global debt level is a staggering $47 trillion higher than it was before the onset of the pandemic. Furthermore, the IIF projects that this upward trajectory in debt is likely to persist. In the first half of 2023 alone, global debt has surged by $10 trillion, and over the past decade, it has escalated by a staggering $100 trillion.
The IIF had previously characterized this situation as a “crisis of adaptation” for corporations adjusting to what it has termed a “new monetary regime.” The Institute further notes that this recent surge has pushed the global debt-to-GDP ratio to 336 % for the second consecutive quarter, marking a reversal from the seven consecutive quarters of decline observed up until 2023.
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