The International Monetary Fund said in a statement that global public and private debt posted its biggest drop in 70 years in 2021 after hitting a record high due to the impact of COVID-19, but overall remained well above pre-pandemic levels.

The IMF reported that total public and private debt fell 10 percentage points to 247% of global gross domestic product in 2021, down from a peak of 257% in 2020.

In dollar terms, global debt continued to grow, albeit at a much slower pace, reaching a record $235 trillion last year.

The global lender said that private debt, which includes non-financial liabilities of corporations and households, led the overall decline, falling 6 percentage points to 153% of GDP, citing data from 190 countries.

The 4 percentage point drop in public debt, to 96 percent of GDP, was the largest in decades.

According to the IMF, the unusually large swings in debt ratios were caused by the economic recovery after COVID-19 and the provision of rapid inflation.

Debt dynamics varied widely among groups of countries. The advanced economies saw the biggest drop in debt, with both public and private debt falling by 5% of GDP last year, followed by similar results in emerging markets, with the exception of China.

But in low-income countries, total debt ratios continued to rise in 2021 because of rising private debt, with total debt reaching 88% of GDP.

Concerns about the ability of low- and middle-income countries to repay their debts are growing: an estimated 25% of emerging market countries and more than 60% of low-income countries are either in or close to debt distress.

The IMF's head of fiscal affairs, Vitor Gaspar, and two other senior IMF economists said that managing high levels of debt would become increasingly difficult if the economic outlook continued to deteriorate and borrowing costs continued to rise.

High inflation continued to contribute to lower debt ratios in 2022, but costs will rise if inflation becomes persistent, which could lead to higher insurance premiums.