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The International Monetary Fund (IMF) has warned that global public debt will approach the size of the entire global economy by the end of this decade. The IMF singled out the United States and China as responsible for rising global debt levels, but said other "large and rich" economies were also facing debt sustainability problems.
Rising public debt can lead to rising interest rates , as governments will need to pay more interest on their debts. This, in turn, could reduce economic growth and corporate profitability, which could lead to a drop in global investment.
When debts increase , risks also increase. Poorly managed debt could worsen inflation, which would be bad for capital markets, especially those in emerging countries.
"Faced with countless spending pressures, political lines that limit taxation, at an insufficient level, directly translate into larger deficits that push debt to ever higher levels. .... ".
Source: Fiscal Monitor IMF