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What Is a Safe Level of Government Debt?
Despite the soaring debt of sovereign nations, there is still no magic number to decide the optimal levels.
The inaugural edition of the Global Debt Monitor of the International Monetary Fund shows that global debt (that is, public plus non-financial private debt stocks) is a humongous $235 trillion in 2021. This is about 249% of the global gross domestic product (GDP). While public or government debt was only 96% of the global GDP, the size of non-financial private debt was a still larger 153%.
One major reason why debt is back in focus is the roller-coaster ride of global debt during the pandemic and its continued persistence at fairly high levels since then. The first year of the pandemic saw both the public and private sector debt surge up to an unprecedented high. While private debt surged up by 13.1 percentage points to touch 158.9% of the global GDP in 2020, the public debt rose by a still faster 15.7 percentage points to reach 99.85% of the global GDP. Consequently, the total global debt rose by 28.8 percentage points to 258.7% of the global GDP, an all-time high.
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