The world is awash with $152 trillion dollars of debt, according to the IMF, an all-time high which sits at more than double the balance at the start of this century. This debt mountain, as of 2015, represents 225 percent of gross domestic product (GDP), up from 200 percent in 2002 and signifies the extent to which increases in borrowing have outpaced economic growth during the period. While the Washington D.C.-based organization emphasized that there is no exact science to knowing how much debt is too much, it has urged governments in certain countries to tackle excessive private debt levels.
A prolonged period of low interest rates, initiated when central banks slashed benchmarks as part of the toolkit engaged to counter the effects of the global financial crisis, has seen many corporates take advantage of the favorable terms to issue aggressive levels of debt. The IMF has sought to pinpoint where it sees the biggest potential problem areas, saying private debt is high not only among advanced economies but also in a few “systemically important” emerging market economies, namely Brazil and China. Although governments only account for around one-third of the world’s debt, the report also showed the swelling of their balance sheets in the years since the financial crisis. The IMF also singled out China as a country at risk of a disorderly wind-down of current high corporate debt levels.
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