Due to the COVID-19 and policies put in place to respond to it, the global debt has jumped to a new high of USD 226 trillion with India's dues projected to rise to 90.6 per cent in 2021, the International Monetary Fund said on Wednesday.

Advanced economies and China contributed more than 90 per cent to the accumulation of world-wide debt in 2020. The remaining emerging economies and low-income developing countries contributed only around seven per cent.

"Because of COVID 19, and of policies put in place to respond to it, debt levels increased fast and reached high levels. High and rising levels of public and private debt are associated with risks to financial stability and public finances," IMF Director of Fiscal Affairs Department Vitor Gaspar told reporters during a release of the 2021 Fiscal Monitor Report.

"The debt of governments, households and non-financial corporations added up to USD 226 trillion in 2020 USD 27 trillion above 2019. This increase is, by far, the largest on record," he said.

This figure includes both public and non-financial private sector debt.

In its 2021 Fiscal Monitor report, the IMF said India's debt increased from 68.9 per cent of its GDP in 2016 to 89.6 per cent in 2020. It is projected to jump to 90.6 per cent in 2021 and then decline to 88.8 per cent in 2022, to gradually reach 85.2 per cent in 2026.

Constraints on financing are particularly severe for poorer countries, Gasper said. Noting that in 2020, fiscal policy proved its worth, he said the increase in public debt, in 2020, was fully justified by the need to respond to COVID-19 and its economic, social, and financial consequences. But the increase is expected to be one-off, he said.

Gasper said debt is expected to decline this year and next by about 1 percentage point of GDP per year.

After that it is projected to stabilise at about 97 per cent of GDP. These debt dynamics are driven by a strong contribution from nominal GDP growth, accompanied by a much more gradual reduction in the primary deficit, he said.

In its report, the IMF said risks to the fiscal outlook are elevated. A scaling up of vaccine production and delivery, especially to emerging markets and low-income developing countries, would limit further damage to the global economy.

On the downside, new variants of the virus, low vaccine coverage in many countries, and delays in some people's acceptance of vaccination could inflict new damage and increase pressures on public budgets. The realisation of contingent liabilities including from loan and guarantee programmes may also lead to unexpected increases in government debt, it said.

Further pressures could come from social discontent, with the crisis estimated to have thrown between 65 and 75 million people into poverty in 2021 relative to pre-pandemic trends. Large government financing needs are a source of vulnerability, especially in emerging markets and low-income developing countries, where financing conditions are sensitive to global interest rates and central banks have begun to raise short-term reference rates, IMF said.

Fiscal policy will need to respond nimbly to these challenges and facilitate the transformation of the global economy to make it more productive, inclusive, green, and resilient to future health or other crises, it said.

At the same time, it will be crucial to ensure transparency and accountability, plot a medium-term path to rebuilding fiscal buffers, and make progress toward the Sustainable Development Goal, it said.