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<p>HM Government continually monitors developments in the global economy, including
public and private debt levels, interest rates and the growth outlook, among other
macroeconomic indicators.</p><p> </p><p>Total global debt increased following the
onset of the pandemic in 2020, reflecting a rise in public and private debt. Public
debt increased as governments introduced fiscal support to mitigate the impact of
the pandemic on livelihoods, whilst revenues fell in line with the broader decline
in economic activity. This fiscal support helped maintain living standards and support
global growth. Private debt has also increased, with government policies helping to
maintain private access to credit to mitigate a more severe downturn.</p><p> </p><p>Higher
global debt levels can increase financial fragilities and lower growth by reducing
investment. Against a backdrop of higher debt levels, rapidly rising global interest
rates and higher energy and food prices may worsen balance of payment and fiscal pressures
and increase risks of debt distress, particularly for some emerging and developing
economies.</p><p> </p><p>HMG works closely with major international organisations,
including the IMF, World Bank, to understand how debt levels are changing, and on
necessary international policy responses, including appropriate support for economies
experiencing debt distress. For example, the UK has committed to channelling circa
up to 20% of its allocation of Special Drawing Rights (SDRs) from the IMF’s 2021 general
allocation of SDRs to those countries most in need; and is driving forward the implementation
of the G20/Paris Club Common Framework for debt treatment to support eligible low-income
countries with unsustainable debt.</p><p> </p><p>In the April World Economic Outlook
the IMF emphasised the need for guaranteeing an orderly system for resolving debt,
including the continued application of the Common Framework, where liquidity support
alone is not sufficient. In the UK, public debt increased during the pandemic, in
line with other countries around the world. In recognition of the risks of high debt,
the UK government has already made responsible decisions which return public debt
levels to a sustainable path, supported by fiscal rules which require debt to fall
as a proportion of GDP over the medium-term.</p>
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