Global Debt Hits Record $348 Trillion, Government Spending Is the Culprit
Global debt has surged to a record $348 trillion at the end of 2025, driven primarily by government spending, according to the Institute of International Finance (IIF).
The total represents an increase of nearly $29 trillion compared to 2024’s $319.5 trillion, marking an annual growth rate of 8.9%—the fastest increase since the pandemic-era spike. The United States, China, and Europe are responsible for approximately three-quarters of the increase.
Government debt accounted for over $10 trillion of the rise, with total government debt reaching $106.7 trillion by the end of 2025, up from $96.3 trillion in 2024. Non-financial corporate debt reached approximately $100.6 trillion, whilst household liabilities increased to $64.6 trillion, though at a more moderate pace.
Despite the nominal increase, the global debt-to-GDP ratio declined slightly to approximately 308% from PDB in 2025, primarily driven by advanced economies. However, emerging markets experienced the opposite trend, with debt-to-GDP ratios rising above 235%.
The IIF highlighted a notable shift in debt composition, with private sector debt declining from its pandemic peak whilst public debt continues to expand. This shift makes the global balance sheet increasingly sensitive to interest rate changes and investor confidence fluctuations.
In January 2026, global government bond issuance reached one of the busiest starts to a year, as governments rushed to secure funding ahead of budget requirements amid strong investor demand. Corporate debt issuance also remained robust, with investment-grade bond issuance in the United States tracking towards a strong year following a busy January, supported by major technology and industrial sector issuers.
The IIF noted that looser financial conditions could support capital mobilisation for national priorities, including defence spending. A new wave of global capital expenditure supercycle—particularly in artificial intelligence data centres, security and energy transition, and resilient infrastructure—is expected to drive growth in global debt markets.
However, growth buffers remain limited. The International Monetary Fund’s January 2026 World Economic Outlook update projects global growth of approximately 3.3% in 2026, with advanced economies growing at 1.8% and emerging markets slightly above 4%. The IIF assessed this rate as insufficient to rapidly dilute rising debt stocks if debt accumulation continues at 2025 levels.
Emerging markets face over $9 trillion in debt maturing during 2026, potentially marking a refinancing record, whilst advanced economies face more than $20 trillion in maturing bonds and loans. The IIF warned that a combination of fiscal expansion, accommodative monetary policy, and regulatory simplification with looser approaches could drive further debt accumulation and heighten concerns over increased leverage and overheating in some markets.
For now, strong demand is helping maintain orderly funding. However, high government financing needs, substantial rollover requirements, and early-year issuance suggest global debt levels will remain near historic records. The IIF concluded that fiscal policy choices will increasingly determine the trajectory of the world’s balance sheet.