In its latest debt watch, the IIF said: “Given 'sticky' inflation in the US and expected delays in Federal Reserve rate cuts, a strengthening dollar… would raise concerns about government debt strains, especially in developing countries. There is a possibility that it may resurface.”
The magazine warned that US President Joe Biden is managing an ever-growing mountain of debt, even as households in the world's largest economy pay down money owed on personal loans and credit cards. .
“While the strength of household balance sheets should provide a buffer against rising long-term interest rates in the short term, government deficits remain higher than pre-pandemic levels, with global debt accumulation expected to rise by around 5 trillion yen this year. It is expected to have an impact of $300 billion.” Said.
Last month, the IMF called on governments around the world to resist the temptation to cut taxes and increase spending in hopes of winning votes in “the biggest election year in history.”
“Governments should exercise fiscal restraint to maintain fiscal health in this exciting election year,” the report said.
The IIF banking lobby also said that with many developing countries struggling with high dollar-denominated debt, “intensifying trade tensions and deepening geoeconomic fragmentation could reduce the ability of emerging countries to repay their external debt.” “It's sexual,” he warned.
The report said: “Although the relatively optimistic near-term global economic outlook is positive for debt trends, stubborn inflation, particularly in the United States, still poses a significant risk, and global financing costs continue to decline.'' “This is putting upward pressure on the market,” he said.
“Rising trade tensions and geopolitical tensions are also major potential headwinds for bond markets. China aims to become the world's leading supplier of new clean energy technologies, but industry-specific protectionist policies could tighten supply chain constraints, and both inflation and interest rates could remain above pandemic levels. Such a scenario would undermine trade and investment flows, leading to emerging and frontier markets. This will further reduce our ability to repay our external debt.”
