No real fix to the sharp rise in public debt loads, economists say
Jackson Hole, Wyoming, Aug 26 (Reuters) – The steep jump in public debt loads over the past decade and a half, as governments borrowed large amounts of money to battle the Global Financial Crisis and the fallout from the COVID-19 pandemic, is probably irreversible.
That’s the unhappy conclusion of a research paper being presented on Saturday to some of the world’s most influential economic policymakers at the Kansas City Federal Reserve’s annual central banking symposium in Jackson Hole, Wyoming.
Despite mounting worries about the growth-crimping implications of high debt, “debt reduction, while desirable in principle, is unlikely in practice,” Serkan Arslanalp, an economist at the International Monetary Fund, and Barry Eichengreen, an economics professor at the University of California, Berkeley, wrote in a paper.
That’s a change from the past, when countries have successfully reduced debt-to-GDP ratios.
But many economies will not be able to outgrow their debt burdens because of population aging, and will in fact require fresh public financing for needs like healthcare and pensions, the authors argued.
