While the concerns “aren’t all setting off alarm bells just yet,” governments will face challenges in balancing the need to tighten up oversight of the financial sector, at a time when the global economy is slowing, said Tobias Adrian, head of the Monetary and Capital Markets Department.
The buildup of debt is apparent for governments and corporations, in advanced and developing nations, according to the report. The stock of lower-rated bonds — ranked BBB — have quadrupled over the past decade, while the amount of more risky debt, known as “speculative grade,” has doubled, according to the IMF report.
So while debtors likely could withstand a moderate slowdown of the economy “without substantial problems,” a more severe slowing or sharper rise in interest rates would create more stress because of the high debt levels, he said.
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