RIYADH – Public debt poses a major threat to markets in the near future, Saudi Arabia's finance minister said, expressing particular concern about lower-income countries as well as what he described as rapidly increasing global fragmentation.
“I think globally the serious, serious issue that we need to keep an eye on is the sovereign debt issue, particularly in low-income countries and emerging markets that don't have the financial buffers to fall back on in the event of market disruptions,” Mohammed Al-Jadaan told CNBC's Dan Murphy of the Future Investment Initiative in Riyadh on Wednesday.
“And hopefully we will find a solution between the IMF and the G20 and be ready to support the global economy in the event of shocks in this area, but it is an area that we as global leaders need to keep an eye on.” it doesn't surprise us.
At the start of the conversation, Al-Jadaan noted the importance of achieving a soft landing for economies as central banks try to get inflation under control.
“We arrived from Washington two days ago, after a week of meetings at the IMF, the World Bank and the G20, and I think there is a clear recognition that the world is indeed proving resilient,” he said. “And there is a lot of discussion about managing the soft landing, which is very important. The biggest challenge is actually the national debt, and there was a lot of discussion last week about ensuring that the three institutions work together to find a solution to the national debt, particularly in low-income countries.”
Global public debt reached a record $97 trillion in 2023, prompting the United Nations to call for urgent reforms for governments and financial systems around the world.
Saudi Finance Minister Mohammed al-Jadaan participates in a panel discussion at the annual Future Investment Initiative (FII) conference in Riyadh on October 25, 2023. (Photo by Fayez Nureldine / AFP) (Photo by FAYEZ NURELDINE/AFP via Getty Images)
Fayez Nureldine | Afp | Getty Images
In Africa in particular, the United Nations wrote in a report from June this year, “struggling economies have led to higher debt burdens in the wake of multiple global crises.” The number of African countries with debt ratios of more than 60% of GDP increased between 2013 and more than quadrupled from 6 to 27 in 2023, the report said.
Debt repayment has also become more expensive, which affects emerging and developing countries more severely.
“I think the painful fact is that many low-income countries now have debt service levels that are actually higher [costly] as their healthcare, education and climate action together,” Al-Jadaan said on Wednesday.
“This is not good for the world and we need to make sure we find a solution to this. Hopefully we can do this and we will work together around the world to find this solution.”
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