Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Global debt is growing, IMF says, but so are values of public assets

Published 10/10/2018, 08:40
Updated 10/10/2018, 08:40
© Reuters. FILE PHOTO: International Monetary Fund logo is seen outside the headquarters building in Washington D.C.

© Reuters. FILE PHOTO: International Monetary Fund logo is seen outside the headquarters building in Washington D.C.

By David Lawder

NUSA DUA, Indonesia (Reuters) - Global debt levels reached a record $182 trillion (138 trillion pounds) in 2017, having grown 50 percent in the previous decade, but the picture looks less grim when public assets are taken into account, the International Monetary Fund said on Wednesday.

The IMF said a new data base in its semi-annual Fiscal Monitor report showed considerable net worth in 31 countries that account for 61 percent of global economic output.

Assets in these countries were worth about $101 trillion, or twice their gross domestic product, with just over half the total in public corporation assets, and just under half in natural resources such as oil or mineral wealth.

"Once governments understand the size and nature of public assets, they can start managing them more effectively," the IMF said in the report. "Potential gains from better asset management are considerable."

The Fund said that revenue gains from non-financial public corporations and government financial assets alone could be as high as 3 percent of GDP a year, equivalent to the annual corporate tax collections across advanced economies.

It cited Australia, New Zealand and Britain as countries that are taking positive steps to better manage their assets against the growth of future liabilities.

More efficient use of government-owned buildings, for example, can help reduce lease costs, the IMF said, while Britain has shifted away from inflation-linked bonds to limit the interest rate risk in the Bank of England's bond portfolio. Pooling investment fees on various government financial assets also can improve returns for taxpayers, the report said.

The report analysed China's public balance sheet and found that its general government net financial worth has deteriorated in recent years to about 8 percent of GDP, largely because of subnational borrowing and underperforming public corporations.

It cited off-budget debt and weak corporate performances as risks for the future.

By contrast, it estimated that Indonesia's increase in public infrastructure investments will boost public wealth by increasing economic output and increasing future revenues.

© Reuters. FILE PHOTO: International Monetary Fund logo is seen outside the headquarters building in Washington D.C.

The report applied a stress to the U.S. public sector assets, heavily concentrated in public pension funds, mortgages and student loans, finding that a scenario involving a severe recession, higher long-term interest rates and rapid falls in stock and real estate prices would shrink U.S. public net worth by an equivalent of 26 percent of GDP by 2020.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.