$88 trillion in debt and a wave of elections. World leaders are hamstrung

Public debt exploded during the pandemic and new borrowing this year is likely to break records in several big economies, leaving governments less able to respond to shocks, fund public services or invest in the energy transition.

World leaders are flocking to Davos this week to pontificate on the planet’s most pressing problems. Two major wars, a shipping crisis, cyber attacks on state institutions and yet more alarming evidence of the climate emergency mean there’s no shortage of talking points. But turning ideas into action when governments owe an unprecedented $88.1 trillion — equivalent almost to the world’s annual economic output — will be hard. Public debt exploded during the pandemic and new borrowing this year is likely to break records in several big economies, leaving governments less able to respond to shocks such as financial meltdowns, pandemics or wars. Even in the absence of a new crisis, soaring debt servicing costs will constrain efforts to tackle climate change and care for aging populations. Public services in many countries are already strained after successive budget cuts. More worryingly still, as debt burdens grow, governments could find themselves unable to borrow more to service existing obligations and fund basic services adequately.