Global Debt Reaches Record $312 Trillion; Banking Trade Group Highlights Climate Finance Challenges, Reports Reuters

Global Debt Reaches Record High Amid Increased Borrowing

NEW YORK – Global debt surged to a record high of $312 trillion by the end of the second quarter, largely driven by borrowing in the United States and China. A report from the Institute of International Finance (IIF), a prominent financial services trade group, highlights that global debt climbed by $2.1 trillion in the first half of the year, marking a peak after earlier data was downwardly revised.

The IIF issued caution regarding the ongoing trend of rising government debt in its latest Global Debt Monitor report. It projects that global government borrowing, currently at $92 trillion, could escalate to $145 trillion by 2030 and exceed $440 trillion by 2050.

“With the Federal Reserve’s new easing policies expected to propel the accumulation of global debt further, a significant concern lies in the evident lack of political motivation to tackle increasing sovereign debt levels in both developed and emerging markets,” the IIF report explained.

A substantial portion of the current borrowing is attributed to energy transitions addressing climate change, which is anticipated to contribute over a third of the projected increase by 2050. The report emphasizes the considerable challenges this presents, as many governments are already dedicating a larger share of their revenues to interest payments.

Large Borrowers on the Scene

The $2.1 trillion rise in debt for this year contrasts sharply with the $8.4 trillion expansion recorded in the first half of 2023, according to IIF data. Besides the borrowing trends in China and the U.S., nations including India, Russia, and Sweden have also increased their debt levels, while several other European countries and Japan have experienced significant decreases.

The global debt-to-GDP ratio, a crucial indicator of repayment capacity, has stabilized at approximately 327%-328%. This stability is partly fueled by above-target inflation in major economies.

In developed markets, this ratio has fallen to its lowest point since 2018, driven by reductions in borrowing from households and the non-financial corporate sectors. Conversely, emerging markets have seen their debt ratio rise to over 245% of output, surpassing a 25 percentage point increase since the COVID-related lockdowns.