The Bank for International Settlements (BIS) has cautioned that global debt levels remain unsustainable, posing a significant threat to the global economy. In its latest quarterly review, the BIS emphasized the need for proactive measures to address these vulnerabilities.
Key Concerns Raised by the BIS:
- High Debt-to-GDP Ratios: The BIS noted that many countries continue to grapple with elevated debt-to-GDP ratios, making them susceptible to economic shocks.
- Rising Interest Rates: As central banks raise interest rates to combat inflation, debt servicing costs are increasing, further straining borrowers.
- Potential for Financial Instability: The combination of high debt and rising interest rates could trigger financial instability, particularly in emerging markets.
Recommendations from the BIS:
The BIS urged governments and central banks to take decisive action to reduce debt burdens and strengthen financial resilience. Key recommendations include:
- Fiscal Consolidation: Implementing credible fiscal consolidation plans to reduce government debt.
- Structural Reforms: Pursuing structural reforms to boost productivity and economic growth.
- Prudent Monetary Policy: Maintaining a prudent monetary policy stance to manage inflation and support financial stability.
The BIS’s warning underscores the importance of addressing global debt vulnerabilities to ensure sustainable economic growth and prevent future crises. Failure to act could have severe consequences for the global economy.
