RIYADH – The Saudi Finance Minister said that the national debt poses a major threat to markets in the near future, expressing particular concern about low-income countries as well as what he described as rapidly growing global fragmentation.
“I think at a global level the serious issue that we need to monitor is sovereign debt issues, especially in low-income countries and emerging economies that do not have financial margins to fall back on in the event of market disruptions.” Al-Jadaan told CNBC correspondent Dan Murphy on Wednesday from the Future Investment Initiative in Riyadh.
“We hope to find a solution between the International Monetary Fund and the G20, and we will be ready to support the global economy in the event of shocks in that region, but it is an area that we need to monitor, as global leaders, to make it more stable.” Pretty sure it doesn't surprise us.”
Al-Jadaan noted earlier in the conversation the importance of achieving a soft landing for economies as central banks try to manage inflation.
He said, “We came from Washington two days ago, after a week full of meetings at the International Monetary Fund, the World Bank, and the G20, and I think there is a clear recognition that the world is already proving its ability to withstand.” “And there is a lot of discussion about guiding a soft landing, which is very important. The main challenge is actually sovereign debt, and a lot of the discussion throughout the last week has been to make sure that the three institutions work together to try to find a solution to the crisis. Sovereign debt, especially in countries with Low income.”
Global public debt will reach a record level of $97 trillion in 2023, prompting the United Nations to call for urgent reforms of governments and financial systems around the world.
Saudi Finance Minister Mohammed Al-Jadaan attends a panel discussion at the Future Investment Initiative (FII) annual conference in Riyadh on October 25, 2023. (Photo by Fayez Noureddine/AFP) (Photo by Fayez Noureddine/AFP via Getty Images)
Fayez Nour El-Din | AFP | Getty Images
In Africa in particular, the United Nations wrote in a report issued in June of this year that “distressed economies following multiple global crises have led to a heavier debt burden.” The report said that the number of African countries whose debt-to-GDP ratio exceeded 60% quadrupled from 6 to 27 between 2013 and 2023.
Debt repayments have also become more expensive, hitting emerging markets and developing countries more severely.
“I think the painful truth is that low-income countries, many of them, are now shouldering debt service that is actually more (costly) than healthcare, education and climate action combined,” Al-Jadaan said on Wednesday.
“This is not good for the world, and we have to make sure we find a solution to that. We hope we do, and we are working collectively globally to get to that solution.”
