Navigating the world of debt

SOUTH Africans may be flattered or exasperated that their country is a member of an elite global economic club that includes China, the US, Australia, Brazil, France, Germany, Indonesia, Italy, Mexico, Russia, Saudi Arabia, and the UK.

- MUSHTAK PARKER

According to the latest edition of the International Monetary Fund's (IMF) Fiscal Monitor, this cabal of 59 countries are expected to see their individual sovereign debt increase in 2025 and beyond, and collectively, their economies represent about 80% of global GDP.

Rising public debt is a universal but perplexing phenomenon. No economy can operate without some level of borrowing, not even the cash and resource-rich countries such as Saudi Arabia, whose sovereign wealth fund, the Public Investment Fund (PIF) has currently assets under management of $925 billion. It’s the country’s ability to service and redeem any debt in relation to its GDP which is one of the best measures relating to government debt. Hence the debt-to-GDP-ratio measures an economy's debt in relation to its economic output, and therefore its ability to service the debt. South Africa's debt-to-GDP-ratio is put at 80%.