Global debt reached an unprecedented $348 trillion by the end of 2025, following a substantial increase of nearly $29 trillion over the year, marking the fastest annual surge since the pandemic, as reported by a banking trade group on Wednesday.
The Institute of International Finance (IIF) revealed that this increase was predominantly driven by governments, contributing over $10 trillion to the rise. The United States, China, and the euro area were responsible for approximately three-quarters of this increase, according to the latest Global Debt Monitor.
The data indicates a shift in the global debt cycle, now less influenced by households or companies and more by persistent fiscal deficits in major economies. Bond markets have absorbed record debt sales since the beginning of the year.
With global growth expected to remain steady yet moderate, investors are questioning whether borrowing can continue accelerating without significantly raising debt ratios or testing the demand for sovereign bonds.
In terms of output, global debt slightly decreased to about 308% of GDP in 2025, primarily due to advanced economies. However, debt ratios in emerging markets continued to rise, reaching a record high of over 235% of GDP.
The IIF stated, “A powerful mix of fiscal expansion, accommodative monetary policy, and ‘lighter-touch’ regulatory simplification could drive further debt accumulation, while raising concerns about rising leverage and potential overheating in parts of the market,” highlighting the ongoing fiscal deficits in major economies.
Sovereigns Dominate Amid Record Issuance
By the end of the year, global government debt stood at approximately $106.7 trillion, up from $96.3 trillion at the end of 2024. Non-financial corporate debt reached about $100.6 trillion, while household liabilities increased more moderately to $64.6 trillion.
In mature markets, total debt climbed to around $231.7 trillion, while emerging markets reached about $116.6 trillion, both setting new record highs.
The composition of this debt has notably shifted: private-sector debt ratios have fallen from their pandemic peaks, whereas public debt continues to expand. This structural tilt towards sovereign leverage leaves global balance sheets more susceptible to changes in interest rates and investor confidence.
January was one of the busiest months on record for sovereign bond issuance globally, as governments pre-funded budget needs amid strong investor demand.
Corporate borrowers have also been active, with U.S. investment-grade issuance on track for another robust year following a rapid January, spurred by large technology and industrial issuers.
The IIF report stated, “Easier financial conditions should support efforts to mobilize much-needed capital for national priorities, including defense finance. A powerful new wave of global capital expenditure ‘supercycles’ is set to reinforce this momentum, with large-scale investment in AI-driven data centers, energy security and transition, and resilient infrastructure emerging as major growth engines for global debt markets.”
The IIF noted that favorable funding conditions and strong risk appetites have also supported issuance across high-yield bonds, leveraged loans, and IPO markets.
This environment could sustain the rise in global debt into 2026 if fiscal deficits remain wide and companies continue to finance capital expenditures through bond markets, it added.
Limited Cushion from Growth
The International Monetary Fund (IMF) projected global growth of approximately 3.3% in 2026, according to its January 2026 World Economic Outlook update, with advanced economies expanding by around 1.8% and emerging markets just above 4%.
These growth rates are steady by recent standards but insufficient to quickly dilute rising debt levels. If borrowing continues at the 2025 pace, debt-to-GDP ratios could start climbing again, especially in emerging markets where leverage is already at record levels.
The IIF estimated that emerging markets face more than $9 trillion in debt redemptions in 2026, a record refinancing burden, while mature markets have over $20 trillion in maturing bonds and loans.
Currently, strong demand has maintained orderly funding, the IIF noted. However, the combination of elevated public borrowing, heavy rollover needs, and record early-year issuance suggests global debt levels are likely to remain near historic highs, with fiscal policy decisions increasingly shaping the trajectory of the world’s balance sheet.
