In a worrisome turn of events, Ethiopia has become the latest casualty in the escalating global debt crisis, defaulting on its financial obligations. Unfortunately, this is just the tip of the iceberg as the consequences of decades-high interest rates continue to reverberate across the world, putting immense pressure on the global economy. Some of the poorest nations are now on the brink, struggling under the weight of a historic debt burden.
This crisis is a lagged effect of a global tightening campaign that, while seemingly over, continues to impact low-income countries. Soaring global interest rates make debt repayment increasingly expensive, drawing unsettling parallels to the debt crisis of the 1980s. The numbers are staggering, with global debt reaching a staggering $307 trillion in 2023. But why does it matter?
Over 100 nations are now forced to cut spending on essential services like health, education, and social protection. The sudden surge in inflation has only exacerbated the problem, pushing global debt to unprecedented highs.
Breaking down the figures, the second quarter of 2023 saw global debt peak at $307 trillion, predominantly propelled by developed countries such as the U.S., Japan, the UK, and France. Global debt encompasses borrowing by governments, businesses, and individuals, and it is at alarmingly precarious levels.
This is not a new problem. In 2021, global debt reached a record $303 trillion, marking a significant leap from the previous record of $226 trillion in 2020. According to the International Monetary Fund (IMF), this surge constitutes the most substantial one-year debt increase since the Second World War.
Closer to home, the U.S. federal budget deficit ballooned by 26% in November, hitting a record $314 billion – the highest since March. This alarming trend calls for urgent attention from Washington to acknowledge and address the very real threat of the impending debt crisis.
As the global community grapples with the fallout, it becomes imperative for nations to confront the reality and take decisive actions to mitigate the escalating crisis before it engulfs us all.
Ethiopia is the latest country to default on its debt.
We are in a global debt crisis, and many are sleeping through it until it arrives on their doorstep.
— Gold Telegraph ⚡ (@GoldTelegraph_) December 25, 2023
Still concerned about the US debt crisis and the worldwide impact. pic.twitter.com/dpCYQJcbke
— Alfredo Lopez (@Juan212448Lopez) December 24, 2023