The International Monetary Fund (IMF) has raised its projections for the global public debt to 98 percent of GDP at the end of 2020, up from 84 percent in October 2019, when the coronavirus emerge

In its Fiscal Monitor Update report released on Thursday, the IMF projected the average overall deficits as a share of GDP in 2020 at -13.3 percent for advanced economies, -10.3 percent for emerging markets and middle-income economies, and -5.7 percent for low-income developing countries, due to the harsh repercussions of the pandemic.

In 2021, the average fiscal deficit is projected to decline to five percent of GDP, down from 5.7 percent in 2020, according to the report.

“As economies recover, revenue collection is expected to improve, whereas pandemic-related spending is projected to decline. Capital spending in 2021 is expected to recover partially in most countries after the temporary cuts in 2020. However, deficits are expected to widen in a few countries as revenue-to-GDP ratios only partially recover, while spending and debt service costs are rising,” said the report

Until present, about $14 trillion have been allocated for fiscal support globally to address the COVID-19 challenge to public finances. Some $7.8 trillion of the total are used in additional spending or forgone revenue, while $6 trillion are allocated for equity injections, loans, and guarantees, added the report.



These allocations, along with the economic contraction that is causing lower revenues, have contributed to saving lives and livelihoods and alleviated the impact of the pandemic on consumption and output. However, they have led to a rise in public debt and deficits, continued the report.



On the other hand, without additional fiscal support beyond that included in the 2021 budgetary plans, projected fiscal contractions over the year could slow down the recovery, the pace and extent of which remain uncertain, the report warned.

The report also expected many emerging markets and developing economies to tighten their fiscal policies in 2021, driven by elevated debt levels, exchange rate risks, and concerns about rating downgrades and adverse market reactions in case large deficits persist.

“Under the current projections, countries with elevated public debt and financing constraints will implement larger fiscal adjustments over the medium term,” stated the report.

About 90 percent of emerging markets and developing economies eased their fiscal policy in 2020 to contain the health crisis and support the economy, with the overall fiscal deficit widening by 5.5 percent to reach 10.3 percent of GDP, the report added.In these economies, double-digit deficits in 2020 have contributed to a surge in average government debt ratios of 63.3 percent of GDP owing to the severe economic contraction and lower revenues from commodities, according to the report.

Central banks’ asset purchases and other support measures on the global level helped reduce average long-term bond yields by 0.5 percent in these economies to below four percent, with effective interest rates declining in more than half of these countries, it said.

Meanwhile, the average government debt of these economies is projected to rise further in 2021 and remain on an upward trajectory, driven largely by China, the report expected.

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