Topic Reading-Vol.2839-1/19/2020

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Topic Reading-Vol.2839-1/19/2020

英語で世界を知ろう!Topic Reading

2020/01/19 Topic Reading-Vol.2839-1/19/2020

Dear MEL Topic Readers,

The world is drowning in debt

The debt-to-GDP ratio compares a country’s sovereign debt to its total economic output for the year, gross domestic product, GDP. This ratio allows investors, leaders, and economists to gauge a country’s ability to pay off its debt. While a high ratio indicates that a country isn’t producing enough to pay off its debt, a low ratio means there is plenty of economic output to make the payments. It’s like household debt and income. Banks may give you more loans if you make more money.

Investors and lenders are happy to take on a nation’s debt if it produces more. But when they start to worry about repayment, they will demand more interest rate payment for the higher risk of default, which will increase the cost of debt for the borrowers. This makes it more expensive for the country to borrow money, which increases fiscal spending and creates more debt, like the Greece debt crisis.

According to the International Monetary Fund, or IMF, Global debt, which comprises borrowings from households, governments, and companies, surpassed 250 trillion dollars last September and brought the global debt-to-GDP ratio to 322%, breaking the historical record. Despite relatively low-interest rates in most countries, the refinancing risk is growing as more than $19 trillion of syndicated loans and bonds are going to need to be refinanced or repaid this year. And there are countries whose financial conditions are skeptical, such as Argentine and Greece.

Enjoy reading the article and learn what’s going on in the global financial market.

MEL School 三鷹
住所 〒181-0013 東京都三鷹市下連雀3-33-13 三鷹第二ビル101
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