The Institute of International Finance (IIF) has revealed that global debt has reached an unprecedented high of $307.4 trillion in the third quarter of 2023.
This record-breaking level, coupled with the emerging markets’ debt-to-output ratio, has raised concerns about the global financial landscape.
The financial services trade group anticipates that global debt is poised to exceed $310 trillion by the end of the year, reflecting a staggering increase of more than 25% over the past five years.
However, the IIF issued a cautionary note, suggesting that a potential shift towards political populism could further elevate debt levels in the coming year.
Emre Tiftik, the Director of Sustainable Research at the IIF, emphasized the growing challenge of servicing debt globally, pointing out that it is claiming an increasingly significant portion of revenues worldwide.
Tiftik highlighted that this issue has reached “alarming” levels in countries such as Pakistan and Egypt.
Projections for the United States indicate a concerning trajectory, with government interest expenses expected to reach 15% of revenue by 2026, a notable increase from the current level of less than 10%.
While the global debt-to-GDP ratio has remained relatively stable at 333%, emerging markets tell a different story.
The ratio surged to 255%, marking a 32-percentage-point increase compared to the same period five years ago.
This surge is notably attributed to countries like Russia, China, Saudi Arabia, and Malaysia. Conversely, Chile, Colombia, and Ghana witnessed substantial declines in this ratio.
The IIF underscored the ongoing escalation of debt loads for households and corporations in key economies, including China and the United States.
These escalating debt levels raise concerns about potential implications ranging from electoral processes to the transition to clean energy.