World debt-public and private-has reached a record $ 188 trillion, accounting for 230% of global GDP, IMF managing Director Kristalina Georgieva said during a speech at the Jacques Polak conference.
According to her, two-thirds of all debt lies with the private sector. Such figures the planet has not seen since the Second World War. Public debt is at its highest since the 1980s.
Georgieva admitted that the idea of taking the money now and returning it later goes back to the distant past. Even in the ancient world, people borrowed to purchase seeds, and the debt was returned after the harvest. “Even now, banks and lenders continue to play an important role in planting the seeds for future prosperity,” the IMF Managing Director said.
At the same time, she added that history has known the negative sides of giving money in debt when an unsupported credit boom led to the global financial crisis. And the current amount of debt, according to Georgieva, just threatens economic stability. “Because of the high debt burden, many governments, companies, and families become very vulnerable in the event of a sharp deterioration in the financial situation,” she said. Among the potential modern threats, Georgieva called trade wars, the uncertain situation with “Brexit,” as well as geopolitical risks.
To avoid problems, Georgieva proposed to be more careful about borrowing, placing a greater emphasis on investments. According to her, the debt practice should be as open as possible and controlled by public authorities.