Global Debt Rises to $307 trillion in Q3, 2023

Global debt reached a historic high of $307.4 trillion in the third quarter of 2023, with the debt-to-output ratio in emerging markets reaching an unprecedented level, as reported by the Institute of International Finance on Thursday.

The financial services trade group anticipates that global debt will surpass $310 trillion by the year’s end, marking a more than 25% increase over the past five years.

Additionally, the institute cautioned that a shift towards political populism could further elevate debt levels in the coming year.

Debt servicing

Emre Tiftik, the Director of Sustainable Research at the IIF, cautioned that the servicing of debt is claiming a growing portion of revenues globally, reaching “alarming” levels in countries such as Pakistan and Egypt.

Projections indicate that in the United States, government interest expenses are expected to reach 15% of revenue by 2026, up from the current level of less than 10%.

During the last quarter, two-thirds of the increase in debt originated from developed markets, with notable contributions from the United States, Japan, France, and the United Kingdom. Emerging markets, including China, India, Brazil, and Mexico, also experienced significant upticks in debt.

Global debt-to-GDP

Although the global debt-to-GDP ratio remained relatively stable at 333%, it surged to 255% in emerging markets, marking a 32-percentage-point increase compared to the same period five years ago.

This rise was particularly driven by Russia, China, Saudi Arabia, and Malaysia. Conversely, Chile, Colombia, and Ghana witnessed the most substantial declines in this ratio.

The IIF noted that government debt saw the most significant increase in the third quarter, highlighting that budget deficits persist well above pre-pandemic levels in numerous countries.

Household debt

The IIF cautioned that the debt load for households and corporations continues to escalate in key economies, such as China and the United States, with potential implications for various aspects ranging from elections to the transition to clean energy.