The coronavirus pandemic has delivered a severe blow to major economies. This is why the US, China, and the European Union are now facing the problem of enormous public debt. Recently, the UK has joined the ranks. The Office for Budget Responsibility has raised the alarm saying that the current level of public debt poses a catastrophic risk to the UK's economy.
The main reason for the increase in public debt is the introduction of stimulus measures by the government to support businesses and ordinary Britons who lost their jobs during the pandemic. The unprecedented amount of funds allocated to boost the economy has only increased the economic burden. Now, surging public debt has become a real threat and may even slow down the economic recovery. Rising inflation makes the situation even worse. For example, the Treasury paid out £8.7bn in June, £6bn more than a year earlier. The Office for National Statistics reported these monthly payments to be the largest since 1997. Notably, the UK government liabilities are indexed to inflation, i.e. linked to the growth of the consumer price index. According to statistics, the country's consumer price index rose to an annualized 2.5% in June, notching the highest level in three years.
