$152 trillion debt could thwart recovery – IMF

Global debt reached an all-time high of $152 trillion in 2015 — about 225% of world gross domestic product — and could thwart the fragile recovery of the global economy, the International Monetary Fund said in its latest Fiscal Monitor on Wednesday.

The IMF said reducing debt significantly will require fiscal policies that support economic activity, and facilitate the restructuring of private debt and the cleanup of non-performing bank loans.

The global gross debt of the nonfinancial sector has more than doubled in nominal terms since 2000, the IMF said.

“Although there is no consensus about how much is too much, current debt levels, at 225% of world GDP are at an all-time high,” said the IMF.

“The negative implications of excessive private debt for growth and financial stability are well documented in the literature, underscoring the need for private sector deleveraging in some countries.”

The IMF said about two thirds of the debt — almost $100 trillion — consists of private sector liabilities.

It said that although not all countries were in the same phase of the debt cycle, the sheer size of the global debt raised the risks for an unprecedented deleveraging — a reduction of debt levels — that could hamper growth worldwide.

“Global debt is one of the major headwinds against growth in the world economy,” said Vitor Gaspar, director of the IMF’s Fiscal Affairs Department.

Gaspar said it was important to have in place measures to prevent excessive debt buildups, particularly in emerging markets, where private sector leverage has increased rapidly over the last few years.