Govts owe $88 trillion in debt, equivalent almost to the world’s annual economic output

LONDON: World leaders are flocking to Davos this week to pontificate on the planet’s most pressing problems, CNN reported.

Two major wars, a shipping crisis, cyberattacks on state institutions and yet more alarming evidence of the climate emergency mean there is no shortage of talking points, CNN reported.

But turning ideas into action when governments owe an unprecedented $ 88.1 trillion -- equivalent almost to the world’s annual economic output -- will be hard.

Public debt exploded during the pandemic and new borrowing this year is likely to break records in several big economies, leaving governments less able to respond to shocks such as financial meltdowns, pandemics or wars, CNN reported.

Even in the absence of a new crisis, soaring debt servicing costs will constrain efforts to tackle climate change and care for aging populations. Public services in many countries are already strained after successive budget cuts.

More worryingly still, as debt burdens grow, governments could find themselves unable to borrow more to service existing obligations and fund basic services adequately, CNN reported.

A government unable to finance its debt “would be forced to implement abrupt and painful” spending cuts or tax hikes, said Michael Saunders, a former member of the Bank of England’s monetary policy committee.