Global Debt Hits Record High Amid Borrowing Surge in Emerging Markets

According to the Institute of International Finance (IIF), global debt has reached an all-time high of $315 trillion, with emerging markets such as China and India experiencing significant increases in borrowing.

The IIF noted that efforts to reduce debt post-pandemic are slowing down as governments worldwide are cutting taxes and increasing spending ahead of a record number of elections this year.

The organization highlighted that emerging markets contributed significantly to the surge, with their debt soaring to over $105 trillion, which is $55 trillion more than a decade ago. China, India, and Mexico have recorded the largest increases in debt this year.

The International Monetary Fund (IMF) also expressed concerns about India’s debt, stating that it could surpass the size of the country’s economy by the end of the decade due to ongoing expenses related to natural disasters.

The IIF’s analysis revealed that global debt rose by $1.3 trillion in the first quarter of the year, impacting the debt-to-GDP ratio as it resumed its upward trend following a decline during the Covid-19 pandemic lockdowns. The increase in government debt was a key driver in advanced economies, particularly in the United States, where persistent inflation could lead to prolonged higher interest rates.

The IIF cautioned that US President Joe Biden continues to oversee a growing debt burden, despite American households making efforts to repay personal loans and credit card debts, while the IMF has also called on governments worldwide to refrain from implementing tax cuts or increasing spending to gain votes during what it describes as the “biggest-ever election year.”

Moreover, the IIF’s banking lobby group warned of the potential risks posed by escalating trade tensions and deeper geoeconomic fragmentation, which could weaken the capacity of emerging markets to service their external debts, especially those denominated in US dollars.