Global debt soars as high rates hit home

GLOBAL debt has surged to a record high of $313trillion (£248trillion), as higher interest rates drive up borrowing costs for companies and governments worldwide.

Borrowers took on an extra $15trillion in 2023, according to the Institute of International Finance (IIF), meaning the world’s debt pile has risen by more than $100trillion in the past decade.

Government debts alone hit $89.9trillion, up from $71trillion on the eve of the pandemic and less than $33trillion before the financial crisis.

The sharp rise in interest rates across much of the world means the cost of servicing these debts is rising painfully.

Jan Friederich, at Fitch Ratings, said higher borrowing costs mark “a quite substantial change from the environment of ... extremely low interest rates to much higher rates right now”. Speaking at the launch of the IIF’S Global Debt Monitor he said that “average interest expenditure relative to revenues is on a substantial upward trend,” particularly for heavily indebted governments in the rich world.

For the average government in Western Europe and North America, debt interest payments are on course to rise from 3.2pc of revenue last year to 4.1pc next year, an increase of more than one quarter.

Surging borrowing has even caused disquiet in the US, where the national debt hit a record $34 trillion in January. America has previously avoided concerns about ballooning borrowing, because the dollar’s status as the global reserve currency means there are always buyers for its bonds.

The pain will grow the longer interest rates are kept high, although the economy overall has handled the impact remarkably well, the IIF said in its Global Debt Monitor.