We Can’t Be Satisfied With Building Up Debt: Ex-RBI Governor Raghuram Rajan

Raghuram Rajan, former governor of the RBI , on Wednesday cautioned against excessive public debt. Speaking to reporters in Rome, the one-time economic counsellor at the IMF said that nations like the US are susceptible to catastrophes in the future.

“We had the global financial crisis and the pandemic,” he said, adding, “People say pandemics are going to be more regular over the next century, so we can’t be satisfied with building up debt.”

Rajan recommended debt reduction as a buffer and added that high public debt can’t be left to fester in the US and its peers in a world that is prone to more pandemics than before.

Earlier, Rajan also gave a speech at the Rome-based Bancor Prize award ceremony where he supported commercial expansion and the reform of international organisations.

The former economist of the International Monetary Fund cautioned reporters in Rome that nations that continue to add to their already massive debt piles risk themselves to the next crisis.

According to the IMF, the US and China are primarily responsible for the global public debt, which is expected to hit $100 trillion by the end of this year, or 93% of the world's gross domestic product.

“I don’t think we should be satisfied with this level of debt, it should be a vulnerability,” said Rajan

Rajan stated that such risks should not be undervalued and that debt must be decreased to provide nations with a safety net in times of need. High debt levels, he continued, also make it challenging for nations to support one another, which puts the world at even greater risk. 

Speaking on the fringes of Rome's annual Bancor Prize ceremony, he discussed the importance of preparing for the future in the face of a world that is becoming more fragmented.