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Global Debt in Focus

Word of the week Wednesday, record highs for global debt, rising global temperatures with April 2024 the warmest on record, and an update on the Israel-Gaza conflict.

Word of the Week Wednesday
Global debt-to-GDP: the measure of the indebtedness of the global economy against its output. This includes borrowing by governments, businesses, and households. According to the Institute of International Finance global debt-to-GDP has hit 333%.

Global Debt Rises to Record Highs

Global debt levels have surpassed $315 trillion reaching their highest level on record having risen $1.3 trillion over the first three months of the year. According to the Institute of International Finance, global debt has been rising as governments engage in fiscal loosening measures ahead of key elections.

With more people heading to the polls this year than ever before, the IMF said that governments should not get carried away with high levels of borrowing in an effort to win over voters. Here, it stated that “In this great election year, governments should exercise fiscal restraint to preserve sound public finances.”

Emerging markets have also seen debt climb to over $105 trillion, having doubled over the last decade. Here, growing government budget deficits, tighter monetary conditions and the strength of the dollar has put pressure on emerging market debt. The IIF also stated that “rising trade frictions and deeper geoeconomic fragmentation could diminish the external debt servicing capacity of emerging markets”.  Regarding emerging market debt, the IMF stated that “to meet debt payments, at least 100 countries will have to reduce spending on health, education and social protection”. This comes as low- and middle-income countries paid $443.5 billion to service public debts in 2022.

Looking ahead, the IIF suggested that global debt levels will continue to rise this year with government budget deficits forecasted to add an additional $5.3 trillion to the figure.

Global Temperatures Continue to Rise

Research from the EU’s climate service has shown that April 2024 was the warmest April on record. Here, the Copernicus Climate Change Service identified that April was 0.67°C above the 1991-2020 average, 0.14°C above the previous April record in 2016 and was 1.58°C above the pre-industrial (1850-1900) average.

This was also the thirteenth consecutive month in a row which saw global temperatures breach new average records. Following months of records being broken, between April 2023 and March 2024, global warming reached 1.58C above the pre-industrial average.

This comes against the target laid out during the Paris COP21 conference in 2015 which saw leaders around the world pledge to keep global warming within a 1.5C threshold of preindustrial levels.

The survey also identified that the global average sea surface temperature came in marginally below the record high of 21.07°C set last month. When looking at sea ice extent, the Arctic Sea ice was some 2% below average while it was 9% below average in the Antarctic.

Commenting on the data, the Director of the Copernicus Climate Change Service said that “whilst temperature variations associated with natural cycles like El Niño come and go, the extra energy trapped into the ocean and the atmosphere by increasing concentrations of greenhouse gases will keep pushing the global temperature towards new records.”

Israel-Gaza Conflict

Negotiations resume in Cairo today, as stakeholders in the process try and get a deal across the line. Hamas have made revisions to a ceasefire proposal and the US are hoping that this will be palatable enough for Israel to go for.

CIA Director Burns is heading to Israel today to speak with Netanyahu, having been in Cairo all of yesterday trying to get this worked out.

The White House has said that Israel’s operation to capture the Rafah crossing doesn’t cross Biden’s “Red Line”, but this could change if the operation gets broader.

The US did however announce that they paused a shipment of weapons to Israel last week given concerns over Israel launching an offensive in Rafah. The White House said that this shipment consisted of 1,800 2,000lb bombs and 1,700 500lb bombs.

An official in the White House said that “the US position has been that Israel should not launch a major ground operation in Rafah, where more than a million people are sheltering with nowhere else to go”.

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