Global Debt Hits New Record High of $318 Trillion

The global debt-to-GDP ratio rose last year for the first time since 2020, with the global debt stock hitting a new record high of $318 trillion at the end of the year as the global economy struggles with slowing growth, the Institute of International Finance (IIF) said.

The $7 trillion increase in global debt was less than half the increase seen in 2023, when expectations of interest rate cuts from the Federal Reserve sparked a wave of borrowing. But the IIF warned that so-called bond watchdogs could punish governments if rising fiscal deficits persist.

“Increased scrutiny of financial balances, particularly in countries with highly polarized political systems, has been a prominent feature of the past few years,” the institute said.

Market backlash over fiscal policy in the United Kingdom led to the end of Prime Minister Liz Truss’s short-lived term in office in 2022, and similar pressure in France led to the ouster of Prime Minister Michel Barnier last year.

The debt-to-GDP ratio, a measure of the ability to repay debt, has approached 328%, up 1.5%, as government debt levels of $95 trillion have been at odds with slowing inflation and economic growth.

The institute said it expects debt growth to slow this year, amid unprecedented global economic policy uncertainty and still-high borrowing costs.

But the institute warned that despite higher borrowing costs and policy uncertainty, its forecast for government debt growth of about $5 trillion this year could be boosted by calls for fiscal stimulus and higher military spending in Europe.

Emerging markets, led by China, India and Turkey, contributed about 65 percent to global debt growth last year.

This borrowing, combined with a record $8.2 trillion in emerging market debt that needs to be rolled over this year, 10% of which is in foreign currency, could strain countries’ ability to meet looming political and economic challenges.

“Escalating trade tensions and the Trump administration’s decision to freeze U.S. foreign aid, such as cuts to the U.S. Agency for International Development, could create significant liquidity challenges and limit the ability to roll over and access foreign currency debt,” the report said.

“This underscores the growing importance of mobilizing domestic revenues to build resilience to external shocks,” the report added.

Tiftic, the institute’s director of sustainability research, said the high volatility underscores the need to increase the capacity of multilateral development banks to mobilize private sector capital.

A number of developing economies, such as Kenya and Romania, are struggling to boost domestic revenues due to popular anger over tax increases in the case of Kenya and upcoming elections in the case of Romania.