By Eswar Prasad and Mengjie Ding
As the fifth anniversary of the collapse of Lehman Brothers draws near and the debate about fiscal austerity continues to rage, it is time to take stock of the trajectory of debt levels in the key advanced and emerging market economies (AEs and EMs). The overall picture of government debt around the world is not a pretty one (interactive data here).
Data from the IMF’s latest Fiscal Monitor show that the level of aggregate net government debt in the world is expected to rise from $26tn in 2008 to $42tn in 2013. The ratio of world net debt to world GDP, a more relevant indicator of sustainable debt levels, shows a corresponding increase from 46 per cent in 2008 to 61 per cent in 2013.