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Advanced economies must urgently address their public debt overhangs


G7 leaders meeting in Italy are unlikely to prioritize discussion of public debt, which now exceeds post-war highs. This would be a mistake.

Public debt in advanced economies has reached such elevated levels that it poses a serious threat to long-term growth and stability. In 2023, general government gross debt (public debt) exceeded $68 trillion – or 111 per cent of gross domestic product (GDP).

Average total debt in advanced economies, including households and business sectors, now exceeds an unprecedented 250 per cent of GDP, compounding vulnerabilities associated with public debt such as increased financial market volatility, structurally slower growth and higher interest rates.

Public debt ratios have increased since the 1990s without major consequence and influential voices have contributed to a benign view on public debt. Combined with the political obstacles to fiscal consolidation, it seems likely that the now more critical debt levels will again not be prioritized by the G7.

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