The institute said in a report on Sunday, that the rise was driven by a sharp build-up in government borrowing, which raised the ratio of global government debt to GDP, to 105% last year, compared to 90% in 2019.
The report stated that the global economy enters 2021 amid growing imbalances, and a record amount of debt that will affect the prospects for recovery.
The sudden rise in global debt levels has occurred since the outbreak of the epidemic, and strict and simultaneous responses to fiscal and monetary policy have led to financial pressures, which have played a major role in reviving the appetite for riskier assets.
The report revealed that with the mountain of negative-yielding debt reaching new records, governments in emerging markets continue to benefit from the search for yield.
The report noted that the value of negative yielding bonds rose to a new record high of $ 18 trillion at the end of last year, compared to $ 11 trillion in 2019.
The weakening of the dollar
Emerging markets will increasingly rely on borrowing in US dollars, as global central banks continue to have ample liquidity.
The report expected that the weak dollar could encourage many emerging markets to borrow more foreign currencies.
At present, 10% of emerging market debt is dollar denominated. The greater use of external financing may be attractive to many emerging market sovereign countries.
The report predicted that the greater dependence on foreign capital may make borrowers in emerging markets more vulnerable to sudden shifts in global risks in due course.
The Corona pandemic during 2020 led to unprecedented turmoil in all economic sectors, prompting central banks around the world to adopt huge stimulus packages, and also lowered interest rates in an attempt to revive the global economy.
And the Institute of International Finance, a global institution that includes more than 470 financial institutions, and its mission is to support the financial industry and manage risks, and includes in its membership global central banks, major international banks, insurance companies, pension funds, asset managers and sovereign wealth funds.