Governments to see inflation-driven drop in debt
Governments will benefit from the biggest inflation-driven drop in debt ratios in over 20 years, credit rating firm Fitch said on Wednesday, estimating it will slice around 5 percentage points off US debt-to-GDP and 2 percentage points globally.
The effects on government debt ratios from 2022 inflation vary by region, with the smallest impact being forecast for the Middle East and North Africa, and the largest impact in sub-Saharan Africa.Developed market sovereigns, in which inflation is forecast to push government debt ratios much lower than the median, include the US at 5 percentage points of GDP, Britain at 4.6 percentage points and Canada at 4.1 percentage points.
Averaged out across all 120 countries Fitch rates, the drop is set be two percentage points, matching 2008 for the most significant inflationary effect in more than 20 years.
Published in The Express Tribune, February 17th, 2022.
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