Alarm bells are sounding over next great ‘debt-quake’

Outlet: Arab News

Language: English

Abstract: A looming public debt crisis, exacerbated by post-pandemic recovery, geopolitical tensions, and the need for climate adaptation, threatens to reshape the global financial landscape. Global public debt is projected to exceed $100 trillion by 2024, surpassing 93% of global GDP and potentially reaching 115% within three years, according to the IMF. This unprecedented debt surge combines with rising spending pressures, aging populations, and the costly demands of climate resilience, creating a cycle of fiscal strain for both advanced and developing economies.

Advanced economies face ballooning debt-to-GDP ratios, which threaten social stability and growth, while developing nations, particularly in the Global South, remain trapped in financial struggles where debt limits growth potential. Traditional debt relief measures offer only temporary respite, and innovative solutions like debt-for-climate swaps, though promising, have yet to gain traction. The clock is ticking for coordinated global action, requiring multilateral development banks to support sustainable, resilient financial frameworks. Failure to recalibrate economic strategies could lead to widespread sovereign defaults, further destabilizing global markets and exacerbating the North-South divide. This global "debt-quake" underscores the need for innovative approaches to sovereign debt management, as the world faces a pivotal moment for economic cooperation and stability.

Read more on Arab News.