Global Debt Reaches Record $338 Trillion, Mirroring Pandemic Surge: IIF Report
WASHINGTON D.C. – โSeptember 25, 2023 – Globalโฃ debt โคhas surged to a newโ record of nearly โ$338 trillion in the secondโค quarter of 2023, โaโ level comparable to the increase seen during โฃthe height of the COVID-19 โขpandemic inโ 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 โขU.S. dollar terms, though the IIF notedโ some of this was attributable to a 9.75% weakening of theโ U.S. currency against a basket ofโ major trading partners since theโ start of the year.
While the overall globalโ debt-to-outputโฃ ratio edged โslightly lower to just above 324%, emergingโ markets experienced a record โฃhighโฃ ratio of 242.4% – โa revision upwards from the May report. Total debt in emerging markets โคrose byโค $3.4 trillion inโค the second quarter, reachingโ 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 โahead, 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 โFrance,referencing the risk of “bond vigilantes” – investors who sellโค off bonds of countries with perceived unsustainable finances.
Concerns were also raised regarding U.S. debt, โwithโค short-termโค borrowing now โฃaccounting for approximately 20% of total government โคdebt and around 80% of โฃTreasury issuance. โคThis reliance on โshort-term debt, the IIF stated, could create political pressure on central banks โฃto maintain low interest rates,โค potentially compromising โฃmonetary policy independence.
The โขIIF’s Global Debt Monitor underscores โขaโค continuing trend of high globalโข indebtedness and โฃpotential vulnerabilities โin both mature and emerging economies.