Global debt has reached a record level of $348 trillion by the end of 2025, following an increase of nearly $29 trillion over the year, the fastest annual progression since the surge seen during the pandemic, according to a banking industry professional association on Wednesday.
This increase was mainly driven by governments, accounting for over $10 trillion of this rise. The United States, China, and the euro area are responsible for about three-quarters of this progression, as stated in the latest Global Debt Monitor publication by the Institute of International Finance (IIF).
Data shows that the global debt cycle is now less driven by households or businesses and more by persistent budget deficits in major economies, while bond markets have absorbed record debt issuances at the beginning of the year.
With stable but modest global growth expected, the question for investors is whether borrowing can continue to accelerate without increasing debt ratios, or without testing demand for sovereign debt.
In terms of GDP, global debt has slightly declined to around 308% of GDP in 2025, mainly driven by advanced economies. Debt ratios in emerging markets have continued to rise, reaching a record above 235% of GDP.
“A powerful mix of fiscal expansion, accommodative monetary policy, and regulatory easing on the margins could lead to further debt accumulation, while increasing concerns about rising debt levels and overheating in certain market segments,” emphasized the IIF, pointing to the persistence of budget deficits in major economies.
SOVEREIGNS DOMINATE IN A RECORD ISSUANCE ENVIRONMENT
Global public debt stood at around $106.7 trillion at the end of the year, compared to $96.3 trillion by the end of 2024, while non-financial corporate debt reached nearly $100.6 trillion. Household liabilities increased more moderately, to $64.6 trillion, according to published data.
In mature markets, total debt rose to around $231.7 trillion, while emerging markets reached nearly $116.6 trillion, both setting new records.
This shift in composition is significant: private sector debt ratios have decreased since the pandemic peaks, while public debt continues to rise. This structural shift towards sovereign debt exposes global balance sheets more to changes in interest rates and investor confidence.
January saw one of the most active starts to the year ever recorded in terms of global sovereign bond issuances, with governments rushing to fund their budgets as investor demand remained strong.
Issuing companies were also active. US investment-grade bond issuances are heading for a dynamic new year, driven by major players in the technology and industrial sectors.
“More favorable financial conditions should support efforts to mobilize the capital needed for national priorities, including defense funding,” noted the IIF report. “A powerful new wave of ‘supercycles’ of global investment spending is strengthening this dynamic, with massive investments expected in AI-driven data centers, security, and energy transitions, as well as resilient infrastructure, all major drivers for global debt markets.”
The IIF highlights that easier financing conditions and a strong risk appetite have also supported issuances in high-yield bond, leveraged loan, and IPO segments.
In this context, global debt could continue to rise in 2026 if budget deficits remain high and companies continue to finance their investments through bond markets, the organization warned.
GROWTH OFFERING LITTLE ROOM TO MANEUVER
In its January 2026 update of the World Economic Outlook, the IMF anticipates global growth of around 3.3% in 2026, with 1.8% expansion for advanced economies and just over 4% for emerging markets.
These rates are considered stable compared to previous years, but insufficient to quickly dilute rising debt levels. If borrowing continues at the pace of 2025, debt-to-GDP ratios could rise again, particularly in emerging markets where financial leverage is already at highs.
The IIF estimates that emerging markets will face over $9 trillion in debt repayments in 2026, a refinancing record, while mature markets will need to manage over $20 trillion in bonds and loans coming due.
For now, strong demand has helped maintain orderly financing, according to the IIF. But the combination of high public debt, massive refinancing needs, and record issuances at the beginning of the year suggests that global debt is likely to remain close to historic highs, with fiscal policy choices playing a crucial role in the evolution of balances on a global scale.
