Managing Director of the International Monetary Fund (IMF) Kristalina Georgieva expressed concern about the growing amount of government debt during a speech on Wednesday ahead of the annual meeting of the IMF and the World Bank.
Global government debt is projected to exceed 100 percent of GDP by 2029 at the expense of both developed and emerging economies.
“Higher debt increases interest payments, puts pressure on borrowing costs, constrains other spending, and reduces the ability of governments to cushion shocks,” Georgieva said.
As a result, she said, aid from developed nations to the neediest countries unfortunately continues to decline.
The rate of increase in the global economy is expected to be around 3% in the medium term, down from 3.7% before the COVID-19 pandemic.
“Global growth patterns have changed over the years, with China’s rate of recovery in particular steadily slowing, while India is emerging as a key engine of growth,” the IMF chief notes.
“Sustained growth requires higher private sector productivity. To achieve this, governments must ensure and protect the essential elements of a free market, including property rights, rule of law, reliable data, effective bankruptcy codes, strong financial sector supervision, and independent but accountable institutions,” she said.
Georgieva said that in too many countries, private sector productivity is “entangled in red tape” and startups are not emerging or cannot grow. “Competition is key and regulation should not allow or create an unfair advantage,” she believes.
“So today I am calling on all our member countries to undertake a regulatory housecleaning to unleash entrepreneurial energy backed by strong institutions and governance. Now is not the time to harm ourselves: now is the time to clean up,” the IMF chief said.
She also called on “my beloved, native Europe” to act.
“Consider appointing a ‘single market czar’ with real powers to push reforms forward. Eliminate border frictions in the labor market, trade in goods and services, energy and finance. Create a single European financial system. Create an energy union. Finalize your project. And watch the dynamics of the US private sector,” Georgieva said.
According to her, “one picture can say more than a thousand words.” “Look at how seven US mega-companies, none of which existed 51 years ago, boast market capitalizations larger than their European counterparts,” the IMF chief said.
Video analysis of the ratio of government debt to GDP is available on the channel of the analytical center Experts Club – https://youtube.com/shorts/skgFqF0c4Gw?si=oJPXANSuNNpWxsmY.
