Debt surges to record high in blow for global economy
GLOBAL debt has surged to a record high of $315trillion (£250trillion) as China and India’s borrowing binge continued despite risks posed by geopolitical tensions and higher interest rates.
The Institute of International Finance (IIF) warned that post-pandemic efforts to reduce debt were coming to an end as governments cut taxes and increase spending amid a record number of elections this year.
It said the increase was “primarily driven by emerging markets, where debt surged to “an unprecedented high of over $105 trillion”.
This is $55trillion more than a decade ago, with China, India and Mexico seeing the biggest increases so far this year.
China is already dealing with a prop- erty crisis that threatens to exert a drag on economic growth for years to come.
The International Monetary Fund (IMF) has also warned that India’s debt pile could exceed the size of its economy by the end of the decade as it spends billions of pounds each year dealing with natural disasters.
IIF analysis showed total world debt rose by $1.3trillion to a record high of $315trillion in the first three months of the year as global debt-to-gdp “resumed its upward trajectory” after falling for a sustained period after Covid lockdowns. It added that government debt drove the rise among advanced economies in the first three months of 2024 as stubborn US inflation threatens to keep interest rates higher for longer.
“Given ‘sticky’ US inflation and an expected delay to Federal Reserve rate cuts, a dollar rally could once again bring government debt strains to the fore, particularly for developing countries,” the IIF said in its latest debt monitor. It warned that Joe Biden, the US president, was overseeing an everrising debt pile, even as households in the world’s biggest economy were paying back money owed on personal loans and credit cards.
“While the health of household balance sheets should provide a cushion against higher-for-longer rates in the near term, government budget deficits are still higher than pre-pandemic levels and are projected to contribute around $5.3trillion to global debt accumulation this year,” it said.