Raghuram Rajan, former Governor of the Reserve Bank of India said that high public debt cannot be left to fester in the US and its peers in a world that is prone to more pandemics than before.
The one-time chief economist of the International Monetary Fund warned countries that if they keep borrowing money they leave themselves exposed for any impending emergencies.
Speaking to some reporters in Rome, he said, “We had the global financial crisis and the pandemic. People say pandemics are going to be more regular over the next century, so we can’t be satisfied about building up debt.”
Rajan added that his warning is appropriate for the US as its debt trajectory is increasing steadily, as per IMF forecasts released a month ago. United States President-elect Donald Trump is currently weighing whom to appoint to manage the country’s borrowings as and when he takes over the White House.
He also added that this level of debt is a vulnerability and people should not be satisfied with it, pointing at the United States.
By the end of this year, global public debt is set to reach $100 trillion or 93% of global gross domestic product, driven by the US and China, as per IMF.
Slowing inflation and falling interest rates continue to offer governments a window to get their fiscal houses in order, according to the IMF, but there is no urgency to do so.
Additionally, Rajan said, that to give countries buffer for times of need, debt must be reduced. High levels of debt make it difficult for countries to support one another which is a further vulnerability, he added.
