Global debt rose $7 trillion to a record high of $318 trillion last year, according to a report released by the Institute of International Finance (IIF). The $7 trillion rise was less than half of the 2023 increase when expectations of Federal Reserve interest rate cuts sparked a borrowing surge. Global debt soared by approximately $15 trillion in 2023.
Total global debt-to-GDP rose for the first time in four years, as GDP growth slowed down, and inflation pressures eased, the IIF said.
“The increasing scrutiny of fiscal balances — particularly in countries with highly polarized political landscapes — has been a defining feature of recent years,” the report added.
While market reactions to rising government debt levels in the U.S. have been relatively muted despite its debt remaining on a ‘non-stabilization path,’ robust economic activity, productivity growth and the safe-haven status of U.S. Treasuries continue to mask the deepening weaknesses in U.S. fiscal balances. However, not all countries enjoy such privileges, added the report.
Emerging markets account for 65 percent of the 2024 rise
The global debt-to-GDP ratio climbed over 1.5 percent compared to 2023, reaching nearly 328 percent of GDP, which marked the first annual increase in debt ratios since 2020, according to the report. Around 65 percent of the 2024 rise in global debt came from emerging markets, primarily China, India, Saudi Arabia and Türkiye.
This borrowing, along with a record $8.2 trillion in debt which emerging markets need to roll over this year, could strain countries’ abilities to face political and economic challenges.
“Heightened trade tensions and the Trump administration’s decision to freeze U.S. foreign aid, including cuts to USAID, could trigger significant liquidity challenges and curb the ability to roll over and access to FX debt. This underscores the increasing importance of domestic revenue mobilization to build resilience against external shocks,” the report said.
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Total debt of developed countries climbs to $214.3 trillion
Meanwhile, developed markets’ debt accumulation was mostly concentrated in the US, Britain, Canada and Sweden. Total debt of developed countries climbed to $214.3 trillion last year, and the combined debt of developing countries was $103.7 trillion.
In addition, global household debt amounted to $60.1 trillion last year and public sector debts were $95.3 trillion. Meanwhile, debts of non-financial companies came in at $91.3 trillion and debts of financial institutions were $71.4 trillion, according to the IIF.
The IIF said it expects global debt growth to slow this year, amid unprecedented global economic policy uncertainty and still-elevated borrowing costs. It warned, however, that despite high borrowing costs and economic policy uncertainty, its forecast of a $5 trillion increase in government debt this year could rise due to calls for fiscal stimulus and larger military spending in Europe.
