Daily Management Review

IMF: Corporations cannot get rid of debts


Over the past five years (from the second quarter of 2013), non-financial corporations around the world have accumulated a total of more than $ 16 trillion of net debt, according to calculations by the Washington Institute of International Finance. Now the amount of debt is at a record high level of $ 74.9 trillion, which is equivalent to 92% of GDP (five years ago it was 86%, in 2008 it was 77% of GDP). Taking into account other types of debt, the International Monetary Fund estimates the total debt burden at $ 182 trillion, indicating that this amount of liabilities is already risky. According to IIF, the global debt of the entire non-financial sector (including governments and the population) is $ 187 trillion - it has increased by $ 30 trillion since the time when the US Federal Reserve Board began raising interest rates in December 2015.

In developed countries, the load in relation to GDP is slightly lower than in developing countries - 90.9% versus 94.6%. Most of the burden lies on Chinese and American companies. In China, the ratio of debt to GDP is already 163% - this is one of the highest rates in the world (except for countries like Hong Kong with 234.3% of GDP). Of the major countries, France has the closest indicator to China - 140% of GDP. However, Chinese corporations, whose shares are traded on the stock exchange, also have large reserves of liquidity: their debt is only a little more than twice the amount of such "stocks". A similar ratio of debt to cash in Japan, in other countries the figure is higher: more than three times - in the Russian Federation and the United States, in Germany - more than four, in Mexico and India - more than five, in Canada - almost seven. In the United States, small and medium-sized companies are primarily characterized by higher loads. At the same time, the ratio of debt to GDP in this country is lower than in the PRC - 72.5%. 

Despite a slight improvement in borrowing conditions over the past year, companies from Brazil, Canada, the United States and China are experiencing difficulties with covering interest payments on existing debt, the IIF notes. The share of companies whose profit before taxes and interest is less than twice the amount of funds needed to service the debt is highest in Brazil (almost 50%) and Canada (about 30%). In the USA, China, Turkey, India, Indonesia, the share of such corporations amounts to about 20%. 

source: imf.org