The April 2018 Fiscal Monitor by the International Monetary Fund (IMF) notes that global debt hit a new record high of US$164 trillion in 2016, the equivalent of 225 percent of global GDP.  Both private and public debts have reportedly surged over the past decade. High debt makes government’s financing vulnerable to sudden changes in market sentiment. 

The report explores how countries can reduce government deficits and debt in a growth-friendly way.  Countries should use the window of opportunity afforded by the economic upswing to strengthen the state of their fiscal affairs, according to the report.  

The report notes that of the US$164 trillion, 63 percent is nonfinancial private sector debt, and 37 percent is public sector debt. Advanced economies are responsible for most global debt.  Nevertheless, in the last ten years, emerging market economies have been responsible for most of the increase.  

Public debt plays an important role in rising global debt, the report says, noting that debt-to-GDP ratios in advanced economies are at levels not seen since World War II.  Public debt ratios have been increasing persistently over the past fifty years.

In emerging market economies, public debt is reportedly at levels seen only during the 1980s’ debt crisis.

For low-income developing countries, average public debt-to-GDP ratios are well below historic peaks, but it is important to recall that debt reduction from earlier peaks involved debt forgiveness.  Moreover, low-income developing countries’ debt climbed 13 percentage points in the last five years.

Along with debt, the cost of debt service has been rising rapidly in low-income developing countries.  The interest burden has doubled in the past ten years to close to 20 percent of taxes.  The escalating cost reflects in part the increasing reliance on nonconcessional debt, as countries have gained access to international financial markets and expanded domestic debt issuance to nonresidents.

Countries with elevated government debt are reportedly vulnerable to changing financing conditions, which could hinder their ability to borrow, and put the economy in jeopardy.   .

The IMF forecasts indicate that debt-to-GDP ratios would come down over the next three to five years in most countries.  But this hinges on countries delivering fully on their policy commitments. There is no room for complacency.

In the April 2018 Fiscal Monitor, IMF urges policymakers to avoid fiscal policies that provide unnecessary stimulus when economic activity is already picking up.  Instead, most advanced, emerging market, and low income developing countries should deliver on their fiscal plans, and put deficits and debt firmly on a downward path.  They should also enact fiscal reforms that increase productivity and promote human and physical capital.

It is imperative that low income developing countries strengthen their tax capacity, the report says, adding that this will allow them to service their debt.  

Meanwhile, Tajikistan’s public debt has reached nearly 3.67 billion U.S. dollars by January 1, 2018, and the country’s public debt-to-GDP ratio has reached 51.4 percent.

Tajikistan’s public debt includes the country’s external debt amounting to some 2.9 billion somoni and its internal debt amounting to some 770 million U.S. dollars.

Tajikistan’s external debt-to-GDP ratio has amounted to 40.3 percent by January 1, 2018.

The Ministry of Finance of Tajikistan says the country’s internal debt has reached 6.8 billion somoni (equivalent to some 770 U.S. dollars) and internal debt-to-GDP ratio reached 11.1 percent.

In a report released at a news conference in Dushanbe, the Minister of Finance Faiziddin Qahhorzoda, revealed on February 16 that China remains Tajikistan’s largest creditor.  Tajikistan now reportedly owes more than 1.2 billion to the export-Import Bank of China (China Eximbank).

Besides, Tajikistan now also owes 318 million U.S. dollars to the World Bank, 278 million U.S. dollars to the Asian Development Bank and 112 million U.S. dollars to the Islamic Development Bank.