## The Pre-Pandemic Debt Landscape—and Why It Matters

_IMF Blog, February 1, 2021_

## Source details

**Canonical URL:** [The Pre-Pandemic Debt Landscape—and Why It Matters](https://www.imf.org/en/blogs/articles/2021/02/01/the-pre-pandemic-debt-landscape-and-why-it-matters)

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## Bibliographic details
- Authors: Xuehui Han, Paulo Medas, Susan Yang
- Published: February 1, 2021

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### Overview
- Global debt (public plus private) reached $197 trillion in 2019, up by $9 trillion from the previous year.
- The global average debt-to-GDP ratio (weighted by each country’s GDP in US dollars) rose to 226 percent in 2019, 1.5 percentage points higher than in 2018.
- Many countries entered the COVID-19 pandemic with elevated debt levels, creating challenges when economic activity collapsed in 2020 and governments provided support.

### Public debt patterns and implications
- 2019 global public debt surpassed its 2007 level by 23 percentage points of GDP.
- Drivers by income group:
  - Advanced economies: public debt rose from 72 to 105 percent of GDP.
  - Emerging market economies: public debt rose from 35 to 54 percent of GDP.
  - Low-income countries: public debt increased by 14 percentage points to 44 percent of GDP.
- Although higher debt can reduce governments’ ability to react to the COVID-19 crisis as forcefully as during the global financial crisis, lower borrowing costs recently have partially offset constraints:
  - Compared to 2007, the average interest bill as a share of revenues was 0.3 percentage points lower in 2019.
- Consequences:
  - Many advanced economies were still able to borrow to address the crisis in the short term.
  - Some highly indebted emerging market and developing economies were beginning to find it more difficult to borrow to support pandemic responses.

### Private debt risks
- High and rising private debt may be a cause for concern for recovery prospects.
- Historical patterns:
  - In leadups to some past financial crises, private debt accumulated far faster than GDP growth, signaling vulnerability.
  - Following credit booms, economic activity tends to suffer.
- Potential transmission channels:
  - Unsustainable private debt of households, firms, or both can lead to large-scale bankruptcies.
  - Such bankruptcies might require government intervention (bailouts of critical sectors or government guarantees on private loans).
  - Elevated private debt before the pandemic can reduce governments’ fiscal space while public finances are strained.

### Key statistics
- Global debt (public + private) in 2019: $197 trillion
- Increase from 2018 to 2019: $9 trillion
- Global average debt-to-GDP ratio in 2019: 226 percent
- Change from 2018: 1.5 percentage points higher
- Low-income countries total debt rise in 2019: 1.3 percentage points of GDP (driven mostly by private debt)
- 2019 global public debt relative to 2007: 23 percentage points higher
- Advanced economies public debt: from 72 to 105 percent of GDP
- Emerging market economies public debt: from 35 to 54 percent of GDP
- Low-income countries public debt: increase of 14 percentage points to 44 percent of GDP
- Average interest bill as a share of revenues in 2019 vs 2007: 0.3 percentage points lower in 2019

*Source: The Pre-Pandemic Debt Landscape—and Why It Matters (IMF, February 1, 2021).*

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## References

- [Global Debt Database](https://www.imf.org/external/datamapper/datasets/GDD)
- [Global Financial Stability Update](https://www.imf.org/en/Publications/GFSR/Issues/2021/01/27/global-financial-stability-report-january-2021-update)

_Source: https://www.imf.org/en/blogs/articles/2021/02/01/the-pre-pandemic-debt-landscape-and-why-it-matters_