Global debt surged to a record nearly USD 353 trillion by the end of March, with emerging signs that investors are beginning to diversify away from US government securities, according to a report by the Institute of International Finance.
The report noted rising demand for Japanese and European sovereign bonds, while interest in US Treasuries has remained largely steady since the start of the year. This shift indicates a gradual rebalancing of global investment flows.
Despite no immediate concerns in the roughly USD 30 trillion US Treasury market, analysts warned that the country’s long-term debt trajectory appears increasingly unsustainable. In contrast, debt ratios in the euro zone and Japan are showing signs of moderation. Under current fiscal policies, the US debt-to-GDP ratio is projected to keep rising, even as corporate bond markets expand, supported by AI-led financing and strong foreign inflows.
A significant contributor to the global debt increase, over USD 4.4 trillion in the first quarter, was US government borrowing, marking the fastest rise since mid-2025 and the fifth consecutive quarterly increase. Meanwhile, China saw a sharp uptick in borrowing by non-financial corporates, particularly state-owned enterprises, outpacing government debt growth.
Beyond the US and China, debt levels in advanced economies declined slightly, whereas emerging markets (excluding China) recorded a modest rise to a record USD 36.8 trillion, largely driven by sovereign borrowing.
Globally, debt stood at around 305 per cent of economic output, remaining broadly stable since 2023. However, trends diverged, with declining ratios in developed markets and rising levels across emerging economies. Countries such as Norway, Kuwait, China, Bahrain, and Saudi Arabia posted the largest increases relative to GDP.
Looking ahead, structural pressures, including ageing populations, higher defence spending, energy transition needs, cybersecurity demands, and AI-related investments, are expected to sustain the upward trajectory of global debt. Ongoing geopolitical tensions, particularly in the Middle East, could further intensify these pressures. |
