Follow us
Publications Commentary Research People Events News Resources and Videos About IFS
Home Publications The rise and fall of borrowing through the pandemic: how does the UK compare?

The rise and fall of borrowing through the pandemic: how does the UK compare?


Governments around the world rightly responded to the COVID-19 pandemic by hugely increasing spending to support public services, businesses and families. At the same time, revenues from taxes on incomes and profits and, in particular, on consumer spending were depressed. The public finances of different countries have been affected differently by these huge interventions, reflecting differences in the trajectory of the virus, the pre-pandemic structure of their economies and their tax and benefit systems, the capacity in their healthcare systems, and the policy choices made in response to the pandemic.

Figure 1. Changes in borrowing in selected advanced economies

Note and source: Changes in ‘general government overall balance’ shown. International Monetary Fund, Fiscal Monitor, October 2021.

Last week the International Monetary Fund (IMF) published forecasts for the public finances of more than 30 advanced economies. Figure 1 shows the projected increase in borrowing between 2019 and the year that borrowing peaks (2020 or 2021), and the subsequent forecast decrease. At more than 10% of national income, the UK saw the sixth-biggest increase in borrowing, with bigger increases in Norway, Canada and Greece, but smaller ones in other large European economies and the US.

Considering the projected trajectory of borrowing until 2026, the UK is also expected by the IMF to see the third-largest falls in borrowing post-pandemic, after Canada and Singapore. On the measure analysed here, the IMF is not expecting the UK’s borrowing to return all the way to its pre-pandemic level, but remain slightly elevated at 2.9% in 2026, compared with 2.3% in 2019. Of course, there is huge uncertainty around the trajectory of the virus globally and in individual countries, the strength of the economic recovery, and policy choices, all of which means that forecasts are even more prone to revision than usual.

Figure 2. Changes in debt in selected advanced economies (2019 to 2026)

Note and source: Changes in ‘general government net debt’ shown. International Monetary Fund, Fiscal Monitor, October 2021.

In Figure 2, we show the change in most of the same countries’ debt in relation to the size of their economy between 2019 and the end of the IMF’s projection in 2026 (countries for which comparable forecasts are available). On average, the IMF expects advanced economies’ debt to stabilise, but not begin to fall, by 2026.

At 75% of national income, debt in the UK before the pandemic (in 2019) was precisely average among all 30 advanced economies analysed by the IMF. As with borrowing, the UK stands out as having a large forecast impact on its public finances: only the US is expected to see a bigger increase in debt as a share of national income over the period. The IMF does not expect debt to begin falling in the UK by 2026. At that point, the UK’s projected debt would remain eighth among the 28 countries with comparable data available – lower than in Japan, the US and most of Southern Europe, but higher than in much of the rest of Europe, Australia, South Korea and Canada.

More on this topic

External publication
IFS Senior Research Ben Zaranko responds to the Spring Statement for Public Finance.
Newspaper article
Director Paul Johnson on the effects of inflation on pension policy in The Times.
Newspaper article
'We haven’t lived through a period like this perhaps since the oil crisis of 1973. That made us poorer. This crisis will also make us poorer.'