Global Debt Reaches Record $338 Trillion, Mirroring Pandemic Surge: IIF Report
WASHINGTON D.C. – September 25, 2023 – Global debt has surged to a new record of nearly $338 trillion in the second quarter of 2023, a level comparable to the increase seen during the height of the COVID-19 pandemic in the first half of 2020, according to a new report by the Institute of International Finance (IIF).
The United States, Germany, Britain, and Japan recorded the largest increases in debt levels in U.S. dollar terms, though the IIF noted some of this was attributable to a 9.75% weakening of the U.S. currency against a basket of major trading partners since the start of the year.
While the overall global debt-to-output ratio edged slightly lower to just above 324%, emerging markets experienced a record high ratio of 242.4% – a revision upwards from the May report. Total debt in emerging markets rose by $3.4 trillion in the second quarter, reaching over $109 trillion.
The report highlighted increasing debt-to-GDP ratios in Canada, China, Saudi Arabia, and Poland. Conversely, Ireland, japan, and Norway saw their ratios decline.
Looking ahead, the IIF warned of important challenges for emerging markets, facing nearly $3.2 trillion in bond and loan redemptions through the end of 2025. The report also cautioned about potential fiscal strains in Japan,Germany,and France,referencing the risk of “bond vigilantes” – investors who sell off bonds of countries with perceived unsustainable finances.
Concerns were also raised regarding U.S. debt, with short-term borrowing now accounting for approximately 20% of total government debt and around 80% of Treasury issuance. This reliance on short-term debt, the IIF stated, could create political pressure on central banks to maintain low interest rates, potentially compromising monetary policy independence.
The IIF’s Global Debt Monitor underscores a continuing trend of high global indebtedness and potential vulnerabilities in both mature and emerging economies.