$348 trillion! Global debt "big bang" Are governments around the world addicted to borrowing?

Cailian Press, February 26 (Editor: Xiaoxiang) The Institute of International Finance (IIF) released a report on Wednesday showing that global debt levels are projected to reach a record $348 trillion by the end of 2025. Of this, just last year alone, debt increased by nearly $29 trillion, marking the fastest annual growth since the early days of the pandemic.

In its latest “Global Debt Monitoring” report, the IIF pointed out that this growth is mainly driven by governments, with government debt accounting for over $10 trillion of last year’s increase.

Data shows that the current global debt cycle is no longer primarily driven by households or corporations but is mainly fueled by persistent fiscal deficits in major economies. Given that global economic growth is expected to remain stable but moderate, the key concern for investors is whether the pace of borrowing can continue to rise without further increasing debt ratios or testing demand for sovereign bonds.

The report states that by 2025, the global debt-to-GDP ratio will slightly decline to about 308%, mainly driven by developed economies. Meanwhile, debt-to-GDP ratios in emerging markets continue to rise, reaching a historic high of over 235%.

The IIF noted, “A powerful combination of fiscal expansion, loose monetary policy, and deregulation could further accelerate debt accumulation—while also heightening market concerns over rising leverage and localized overheating.” The organization emphasized ongoing fiscal deficits in major economies.

Sovereign debt leads record issuance scale

Specifically, global government debt at the end of last year was approximately $106.7 trillion, up from $96.3 trillion at the end of 2024; non-financial corporate debt was about $100.6 trillion; household debt grew modestly to $64.6 trillion.

Debt in developed markets increased to about $231.7 trillion, while emerging markets reached approximately $116.6 trillion, both hitting record highs.

Changes in debt structure are particularly notable: private sector debt ratios have fallen from pandemic peaks, but public debt continues to expand. This shift toward sovereign leverage makes global balance sheets more vulnerable to interest rate fluctuations and changes in investor confidence.

The trend of rapid debt growth clearly continued into early this year—January saw one of the busiest starts for sovereign bond issuance on record, as governments rushed to finance budget needs amid strong investor demand; corporate borrowers were also active—driven by large tech and industrial issuers, U.S. investment-grade bond issuance surged in January and is expected to remain strong.

The IIF stated in the report, “A loose financial environment should support countries in raising urgently needed funds for defense spending and other national priorities. A new super cycle of global capital expenditure, driven by artificial intelligence, data centers, energy security and transition, and resilient infrastructure investments, is strengthening this momentum and becoming a major growth engine for the global debt market.”

The IIF also pointed out that the loose financing environment and strong risk appetite have supported issuance in high-yield bonds, leveraged loans, and IPO markets. The organization indicated that if fiscal deficits remain high and companies continue to finance capital expenditures through bond markets, global debt could continue to rise into 2026.

Limited buffers from economic growth

The IMF’s January 2026 update of the World Economic Outlook forecasted global economic growth of about 3.3% in 2026, with developed economies growing around 1.8% and emerging markets slightly above 4%.

While this growth rate is relatively steady by recent standards, it is clearly insufficient to quickly dilute the rising debt stock. If borrowing levels stay at 2025 levels, debt-to-GDP ratios could rise again, especially in emerging markets—whose leverage is already at historic highs.

The IIF estimates that in 2026, emerging markets will face over $9 trillion in debt repayment pressures, reaching record refinancing burdens; mature markets will need to handle over $20 trillion in maturing bonds and loans.

The organization noted that current strong demand supports the financing order. However, high public borrowing, heavy rollover needs, and record-breaking issuance at the start of the year suggest that global debt levels may remain near historic highs, with fiscal policy choices increasingly determining the direction of global balance sheets.