Mubasher – Iman Ghaly: Central banks globally are responding to the decline in market sentiment by slowing down the pace of raising interest rates, especially with the global debt rising by more than $8.3 trillion in the first quarter of 2023.
According to a recent report by the Institute of International Finance, this is the second consecutive quarterly increase in global debt, after two quarters of sharp decline during the rapid tightening of monetary policy last year..
In the first quarter of this year, global debt reached nearly $305 trillion, an increase of about $45 trillion over its level before the coronavirus pandemic.
This comes with expectations of a continuation of the increase, amid high government borrowing needs, despite fears of a credit crisis in the wake of the recent turmoil suffered by the US and Swiss banking sector after banks declared bankruptcy.
The “international finance” attributed the continued need for borrowing to several factors, including population aging, rising health care costs, and the impact of this on pressure on government balance sheets, in addition to the escalating geopolitical tensions, which are driving an increase in defense spending in the medium term, which may affect on the credit profile of both sovereign and corporate borrowers.
He pointed out that the continuation of these factors will have significant effects on international debt markets, especially if interest rates remain higher for a longer period, indicating that emerging market debt has now reached more than $100 trillion, while global debt has stabilized near 335% of GDP.
And the “Institute” indicated that the increase was the sharpest in the markets of Japan, the United States, France and the United Kingdom, while the largest increase occurred in emerging markets in the economies of China, Mexico, Brazil, India and Turkey, bringing the debts of that market to more than 100 trillion dollars from 75 trillion dollars in 2019.
He revealed that despite recent banking failures, and US financial institutions carrying debts of about 78% of GDP, much less than in the period before the 2007/2008 crisis of 110%, fear of contagion led to the withdrawal of large deposits from the United States. regional banks.
The “International Finance” stated that emerging markets benefited from the recent weakness of the US dollar and the slowdown in interest rate rises in mature markets.
It is noteworthy that the United States of America is currently facing a crisis represented in the possibility of defaulting on its debt obligations by the beginning of next June, as confirmed by US Treasury Secretary Janet Yellen.
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