Global Debt Hits Record $338 Trillion: IIF

Global debt has surged to an all-time high of $337.7 trillion by the end of Q2 2025, according to the Institute of International Finance (IIF), raising alarms about the sustainability of global borrowing amid easier financial conditions and a weakening U.S. dollar.

In its latest Global Debt Monitor report, the IIF revealed that debt levels increased by more than $21 trillion in the first half of the year alone, a pace not seen since the COVID-19 pandemic's peak in late 2020.

“The magnitude of this increase rivals what we saw in the second half of 2020, when pandemic-related policy responses triggered unprecedented debt accumulation,” the report stated.

The debt explosion was fueled by a combination of eased global monetary policy, declining interest rates, and a nearly 9.75% drop in the U.S. dollar’s value against a basket of major trading partner currencies since January.

According to the IIF, the largest dollar-denominated debt increases were recorded in China, France, the United States, Germany, the United Kingdom, and Japan — though part of this rise is attributed to currency effects from the weaker dollar.

Despite the nominal rise in global debt, the global debt-to-GDP ratio has continued a slow downward trend, now standing slightly above 324%. However, emerging markets are bucking this trend.

Countries like Canada, China, Saudi Arabia, and Poland saw the most significant jumps in debt-to-GDP ratios, while Ireland, Japan, and Norway recorded declines.

Notably, the debt burden in emerging markets has reached a new record of $109 trillion, after increasing by $3.4 trillion in Q2 alone. The emerging markets' debt-to-GDP ratio hit 242.4%, exceeding previous estimates and setting a new high.

Emerging economies now face approximately $3.2 trillion in bond and loan maturities before the end of 2025, a figure the IIF warns could trigger renewed market stress, particularly amid persistent global uncertainty.

The report also flags growing vulnerabilities in advanced economies such as Japan, Germany, and France, calling for increased vigilance from “bond vigilantes”, investors who pressure governments by selling off sovereign debt deemed fiscally unsustainable.

The IIF further highlighted growing concerns over U.S. government debt, particularly the surge in short-term borrowing. Currently, around 20% of the U.S. government's debt is short-term, and approximately 80% of all Treasury issuance this year has been in short maturities.

Analysts warn that this trend could pressure central banks to maintain low interest rates, undermining their monetary policy independence and exposing economies to rollover risks.

The IIF’s warning echoes recent concerns from global financial institutions, including BlackRock and the Bank for International Settlements, both of which have cautioned that ballooning public debt poses significant long-term risks to financial stability and sovereign creditworthiness.

As borrowing costs remain low for now, the temptation for further fiscal expansion remains strong, but the IIF cautions that the window for responsible debt management is closing.

“As global debt soars, policymakers must tread carefully,” the IIF wrote. “Markets are watching closely,  and their patience may not last forever.”