Institute of International Finance (IIF) released its latest Global Debt Monitor, revealing that global debt reached an unprecedented $348.3 trillion by the end of 2025.
The year saw a surge of nearly $29 trillion, the sharpest annual increase since the pandemic-era borrowing spike. This expansion was overwhelmingly driven by persistent fiscal deficits in the world’s largest economies.
The Breakdown: Who Owes What?
The surge is no longer led by households or private companies, as was common during the pandemic; instead, sovereign (government) borrowing has become the primary engine of global debt.
| Debt Category | Amount (End-2025) | Growth Driver |
| Government | $106.7 Trillion | US, China, and Euro Area deficits. |
| Non-Financial Corporate | $100.6 Trillion | AI data centers, clean energy, and M&A. |
| Household | $64.6 Trillion | Slower growth due to high mortgage rates. |
| Financial Sector | $76.4 Trillion | Stable but elevated. |
Regional Divergence: Advanced vs. Emerging
While both regions hit record nominal highs, their “debt-to-GDP” ratios—the measure of a country’s ability to pay back its debt—are moving in opposite directions.
- Advanced Economies ($231.7 Trillion): Despite record nominal debt, the debt-to-GDP ratio actually fell slightly to 308%. This is due to high nominal growth and inflation “eroding” the relative size of the debt. The U.S., France, and Italy saw the largest public debt expansions.
- Emerging Markets ($116.6 Trillion): Debt-to-GDP ratios reached a historic high of over 235%. Emerging markets are facing a record $9 trillion in debt redemptions in 2026, creating a significant “refinancing wall” that could trigger localized crises if interest rates remain high.
The 2026 Outlook: A “Refinancing Supercycle”
The IIF warns that the world is entering a precarious phase where “sovereign leverage” makes the global economy highly sensitive to interest rate swings.
- Maturity Wall: Between mature and emerging markets, over $29 trillion in bonds and loans are set to mature in 2026, requiring massive amounts of new borrowing just to pay off the old ones.
- The AI & Defense Squeeze: Governments and corporations are under pressure to borrow even more to fund “national priorities,” including the AI infrastructure boom and increased defense spending amid geopolitical tensions.
- The “Bond Vigilantes”: Investors are increasingly scrutinizing the fiscal policies of highly indebted nations like the U.S., France, and Britain. Any sign of fiscal “recklessness” could lead to sudden spikes in borrowing costs (bond yields).
Economic Impact
While the global economy remains resilient—with the IMF projecting 3.3% growth in 2026—high debt acts as a “drag.” In many developing countries, interest payments now consume a larger share of the budget than education or healthcare, potentially trapping some nations in a cycle of low growth and high repayment.
