National Debt Crisis: For the IMF, sharp rises in interest rates raise fears of a financial crisis

“”At the budget level, the agility of many countries is already affected by the constrained spending associated with Covid-19. Debt levels have increased significantly as exceptional budgetary support is expected to be withdrawn from 2022 to 23.“Observe Pierre Olivier Grinchas, IMF Principal Investigator who is afraid of it.”The war in Ukraine and rising interest rates across Lemond will further reduce the financial capacity of many countries, especially developed and emerging countries that import oil and food.“.

Downward revision of growth forecast

On Tuesday, April 19, the International Monetary Fund (IMF) lowered its 2022 global growth forecast by 0.8 points from January to 3.6%. Amendments justified by the war in Ukraine, sanctions against Russia, and confinement carried out in China to stop the Covid-19 epidemic.

Rising global inflation

Washington-based institutions also expect inflation to be higher and longer than expected. The war in Ukraine will disrupt supply chains that have barely recovered from the turmoil of the last two years associated with factory closures, rising sea freight prices and port congestion. These new turmoil will primarily affect wheat trade as corn (Ukraine and Russia provide 30% of the world’s supply) and raise raw material prices. “The extent of these changes depends not only on the decline in exports due to conflicts and sanctions, but also on the elasticity of global supply and demand,” the IMF said, and believes that reserves in other countries will be easier. .. Used for oil rather than gas.

Europe was most seriously affected

European countries are one of the countries most affected by the economic shock of the war in Ukraine. Consumer prices rose 12.6% (5.3% in the Eurozone) in 2022, and GDP growth in South America, the Middle East and there fell 1.1 points to 2.8% compared to January’s forecast. It has been fixed.

Negative rate debt … it’s over!

It’s almost over for countries that live with excessive credit as interest rates rise. Global inventories of negative interest rate debt are plummeting. It decreased from 14 trillion in December 2021 to only 2.7 trillion in March 2022.

Changes in France’s Debt Rate over 10 Years (OAT TEC 10) ©

Excessive debt, countries that cannot be repaid

It doesn’t matter if the country doesn’t repay the loan. To not make it the default, all you have to do is borrow again to repay the first loan. This is the concept of permanent debt. But there is a shadow in this idyllic picture of poorly managed finances. Rising interest rates can be even stronger, and countries involved can be in default. The IMF sees this as a strong sign of the upcoming financial crisis.

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