Statistics recently published by the Washington-based Institute of International Finance indicate that global debt had reached $247.2 trillion by the end of march, up 11.1 percent from a year earlier.

The continuous global debt accumulation has been largely caused by the easy financing environment over the past years, in which the long-term low interest rate policies of many countries have greatly expanded their domestic credit and lowered their corporate borrowing costs. At the same time, stimulative fiscal policy has encouraged governments and enterprises to increase debt. As a result, cheap capital has flooded the markets across the world and the leverage level of all sectors has increased.

Ever-soaring debts have seriously restricted the space for fiscal policy adjustments. Experience shows that economies with high public debts and large fiscal deficits usually have a longer period of recession, because any time when they need fiscal support to fend off a downturn, the excessive public debt always restricts policy implementation. Excessive debts are also an important cause of a financial crisis. A heavy debt burden is usually considered an important indicator of financial fragility. For countries with relatively open capital accounts, domestic financial fragility could quickly evolve into a financial market risk, triggering capital outflows and putting pressure on their currencies.

The interest rate hikes by the US Federal Reserve and a stronger dollar have added to the debt problems in some economies, especially emerging economies. Given that the US dollar accounts for up to 80 percent of the foreign currency financing of emerging economies, a stronger dollar will exacerbate the risks of their dollar-denominated debt repayment. Worse, under a strong dollar, their home currency depreciation has further accelerated capital flight.

Multiple measures are needed to prevent a global debt crisis. Aside from efforts to keep robust economic growth, all countries should avoid adopting unnecessary fiscal stimulation policies and develop policy plans to curtail debts and deficits, and reduce excessive exposure to the risks arising from over-reliance on a single foreign currency.

--People's Daily