A research study indicated the difficulty in finding a real solution to the sharp increase in public debt burdens over the past fifteen years, during which governments borrowed large amounts to cope with the global financial crisis and the repercussions of the COVID-19 pandemic. The study was presented by International Monetary Fund economist Serkan Arslanalp and University of California economics professor Barry Eichengreen on Saturday during the annual central banks' symposium hosted by the Federal Reserve in Jackson Hole, Wyoming.
The study noted that since 2007, the average global public debt has risen from 40 percent to 60 percent of GDP, with debt-to-GDP ratios being higher in developed countries. This includes the United States, the largest economy in the world, where government debt now exceeds the country’s annual economic output. Fifteen years ago, U.S. debt was about 70 percent of GDP.
The study mentioned that despite growing concerns about the implications of rising debt on growth rates, "debt reduction is practically not feasible, even though it is desirable in principle." It added that many economies worldwide will be unable to overcome their debt burdens due to aging populations, and they will need new funding to meet needs such as healthcare and pensions.
The study concluded that "high public debt will remain... Whether we like it or not, governments will have to coexist with inherited high debt."
