July 25, 2021

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Status of global debt during Covid-19

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Uday Deb
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We as a global citizen are now collectively observing this pandemic situation for more than 3 quarters, countries with best and no healthcare infrastructure have struggled throughout in containing it. Damages were not only limited to loss of lives, but gave deeper cuts than we imagined in macro as well as micro wellbeing of the countries. Economies have crippled, industrial productions tapered, healthcare infrastructure burdened, growth in unemployment rate, all seem to be worse nightmare; but we survived together leaving an old world and entering a new world. This new is yet to prove its worth, no one knows about its credibility, liability, responsiveness and sustainability; mainly due to paradigm shift in political as well as economic powers. During all these months one more thing attracted the interest of all development practitioners and policy makers, i.e. provision for fighting against Covid-19 and debt of his/her own country. Countries with limited healthcare funds have faced the worst time, one hand their field operations are stalled and on the other new funds for their basic healthcare need is now in vague condition. Countries are back in stage where they were during the start of this new millennium, i.e. year 2000. Reports have shown that average global debt have increased most during this pandemic and is expected to surge high in next two quarters.

The term used for this situation by IIF is “debt tsunami”, the observed data shows this all, expected global debt by the end of year 2020 will be USD 280 trillion, which is more than 360% of our global GDP.

The Global Debt Monitor report mentioned that, lock down of businesses and extra provisioning for health care due to pandemic is one of the main reasons for incremental change in global debt, which in only during first three quarters increased by USD 15 trillion. These debt levels have seen new records in advanced nations, mainly due to highest stimulus packages announced by governments. Increasing global debt is definitely an alarming situation for all of us, especially to households, businesses, governments and multilateral development organizations. Increased debt will put pressure on various stakeholders in developing as well as developed economies.

We have seen this kind of global crisis during 2008-9 and Asia financial crisis during 1997-98. We may expect similar critical situation in next 3 to 4 quarters, with some symptomatic events like: Failure of banking / financial systems in countries Inflation and hyperinflation in some countries Macroeconomic and microeconomic instability Increase in Debt to GDP ratio beyond control Failure of large and medium scale industrial and service enterprises This all looks scary and definitely call for some steps at specific country and global level. International agencies have already stepped up to handle the situation in coming future, these steps are largely focussing on making local economy sustainable, prosper entrepreneurial ecosystem, policies to share prosperity with vulnerable sectors/segment, and so on. Let’s see how things will take shape in coming time.

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Disclaimer

Views expressed above are the author’s own.

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Disclaimer

Views expressed above are the author’s own.

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