International Monetary Fund Warns of Rising Debt and Bond Yields for Global Economies
The International Monetary Fund warned about the impact of high debt ratios and rising bond yields on public finances.
In a blog post published by the International Monetary Fund's Fiscal Monitor Report, it was stated that the increase in global public borrowing has amplified fiscal risks.
Fiscal Policy and Debt Relationship
High and rising debt levels significantly strengthen the interaction between fiscal policy and interest rates. During periods of high indebtedness, increases in policy interest rates negatively affect budget deficits and the total debt stock.
Global Debt Projections
Global public debt is expected to exceed 100 percent of global Gross Domestic Product by 2030. This situation brings along serious challenges in terms of future fiscal planning.
Bond Yields and Borrowing Costs
Between February and September, the average 10-year government bond yields of G7 countries increased by more than 1 point, reaching their highest level in approximately 20 years. Governments' average borrowing costs are projected to rise from 2.3 percent in 2021 to 3.7 percent by 2031.