Global debt rose to a record $365.5 trillion in the first half of this year, an increase of more than $10 trillion, according to a report issued Wednesday by the Institute of International Finance, driven mainly by a rise in emerging-market debt.
China leads increase in emerging-market debt
Emerging markets led the increase in global debt, with China at the forefront. Its total debt rose by about $6.5 trillion to $110.6 trillion.
The increase in global debt was less than half its level during the same period last year, when it reached about $21 trillion, amid higher interest rates, debt-servicing costs and energy prices.
The report said slower debt growth does not mean that the long-term drivers of borrowing are easing. It forecast global spending on healthcare, energy security, artificial intelligence, information technology and defense to reach about $25 trillion this year, equivalent to nearly one-fifth of global output.
Borrowing costs at their highest level since 2008
The average cost of government borrowing across the Group of Seven reached its highest level since mid-2008, while annual interest expenses rose by about 85 percent. Advanced economies paid more than $3.5 trillion in interest on internationally traded government bonds over the past 12 months.
Advanced markets face maturities of more than $12 trillion in principal on bonds and loans during the remainder of this year, while maturities in emerging markets exceed $3.5 trillion.
Record sovereign bond issuance
The Institute of International Finance said external financing conditions remain unusually favorable, particularly in emerging markets, with foreign-currency sovereign bond issuance reaching record levels, led by Mexico, Saudi Arabia, Poland and Turkey.
Higher debt levels, particularly government debt, increase debt-servicing burdens on public budgets, potentially limiting governments’ ability to direct spending toward investment and public services. Rising interest rates also increase the cost of refinancing existing debt, leaving more heavily indebted economies exposed to greater financial pressures.
