Expressing concern over the impact of stressed trade negotiations, rising geo-political tensions and high debt levels of several economies, Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday backed the building up of forex reserves by emerging economies to protect against global contagion.

Speaking at the book launch of "India's Relations with the International Monetary Fund" written by V. Srinivas, Mr Das said the government debt of advanced economies as a group has surpassed 100 per cent of gross domestic product (GDP) adding to the constraints in fiscal space in many of these countries.

"International coordination has become somewhat weaker in the very recent years. Many advanced economies have been pursuing low interest rate policies for long without perhaps adequate recognition of their adverse impacts," Mr Das said.

Mr Srinivas, a civil servant of the 1989 batch, was the advisor to the executive director for India at the International Monetary Fund (IMF) during 2003-06.

"Solutions are turning more difficult to come by as the global economy seems to be moving into a new and unsettling phase in an environment of stressed trade negotiations, rising geopolitical confrontation, limited policy space and high debt levels in several economies," Mr Das said

"General government debt of advanced economies (AEs) as a group has surpassed 100 per cent of GDP. At the global level the total quantum of bonds with negative yields has risen to nearly $13 trillion, implying that nearly a third of AEs government bonds trade at negative yields.

Fiscal space is also constrained in many of the advanced economies. It is important in the backdrop of slowing global growth that policies of monetary and fiscal authorities are well-calibrated so that they support growth without further build-up of leverage and asset price bubbles," he added.

According to the RBI Governor, "return to lower interest rates in AEs poses challenges as leverage has already built up in the emerging market economies (EMEs) and the needed de-leveraging is not complete in many European economies."

"Amid low global interest rates, total credit to the non-financial sector in the EMEs went up from 107.2 per cent of GDP at the end of 2008 to 194.4 per cent of GDP by March 2018, before it dropped to 183.2 per cent at the end of 2018," he said.

Net private capital flows to EMEs in the form of direct and portfolio investments also nearly doubled in the post-crisis period, posing risks to some EMEs.

"Some of these risks have surfaced in form of weak bank and non-bank balance sheets and some remain latent and can surface, especially when the global interest rate cycles turn decisively. The world will be looking to the IMF to suggest dependable solutions," Mr Das said.