IMF Highlights Growing Public Debt Concerns Throughout the World

A recent Wall Street Journal article quoted the head of the IMF as saying that spending by governments in order to combat the economic downturn brought about by COVID-19 could “propel public debt to a record level”. The IMF has published that 12% of global economic output, $11.7 trillion, has already been committed to battling this downturn.

Historically, the GOP have been the deficit hawk party, and given the already large amount of stimulus payments that have been made, over $2.59 trillion, the deficit may return to the forefront of congressional politics.

Given that the world economy is forecast to contract by 4.4%, the IMF still maintains that it is important to offer short-term help for laid-off workers. However, based on what we have seen so far, the US government may continue in its reluctance to give out further pandemic assistance.

This could have a troublesome effect on Puerto Rico. With stimulus negotiations having stalled recently, and President Trump stating that they will not resume until after the elections, worries could arise regarding the United States national debt, and this could lead to a watering down of a potential stimulus bill in January.

A lack of future stimulus funds for Puerto Rico due to debt concerns in Congress could have catastrophic consequences for businesses on the island. Given current uncertainty regarding any further reopening of business, this further lack of federal funds could be the straw that breaks the camel’s back and provokes the closing of hundreds of small and medium businesses throughout the island.