Categories
Business World

Covid-19 Impact: Governments world over experiencing rising debt

Governments world over have been experiencing a rise in debt lately, due to the unprecedented Covid-19 pandemic.

Since the virus came into play, lockdowns were imposed by governments to curb spreading of infection, but this measure led to several sectors of business severely getting impacted, many businesses shut down and several are still hanging by a thread, trying to survive.

In order to mitigate few of these risks and losses, ease the distress of businesses and individuals, governments announced financial support packages to help revive them.




These financial stimulus packages have burdened governments, forcing many to borrow money thus adding to the already existing pile of debt. This build up is becoming a contingent liability.

Fiscal package amounts have been way higher in developed nations than developing and underdeveloped countries.

ADVANCED ECONOMIES

Among the developed or advanced nations, Japan took the lead. It announced the highest fiscal stimulus in the entire world – some $2.83 trillion, about 56.09% of its GDP.



Second on the list is the United States. The North American nation announced a total stimulus amounting to $1.9 trillion or 26.46% of its share of GDP. This value is four times more than what was spent during the 2008 financial crisis.

The borrowings are pretty much high in most advanced countries.

EMERGING MARKETS

In emerging markets such as India, the government announced a Covid-19 relief package in 2020 that stood at 8.6% of its GDP, about $300 billion.

China is estimated to have spent about $76 billion, about 4.7% of its GDP.

Government Covid-19 fiscal stimulus package as share of GDP

FOREIGN AID

Several rich nations came to the rescue of poor nations battling the deadly pandemic by providing financial aid, as well as vaccines, beds, ventilators, oxygen cylinders and other Covid-19 supplies.

The United States’ $1.9 trillion stimulus package included $11 billion in foreign aid. Japan extended its aid grant to India from $14.8 million to $50 million. All of these expenditures would only further dent the wallets of rich countries.

The IMF and World Bank also pitched in to help poor nations.

DEBT DEFAULT

Several nations have begun defaulting their payments.




Argentina defaulted three months after COVID struck last year. Zambia became the first African country to default on debt against the backdrop of the Covid-19 pandemic.

The severe debt increase has been drastically stressing economies worldwide and the brunt of it is beared by its citizens.