The global debt level reached a record $348 trillion in 2025, witnessing the fastest annual increase since the COVID-19 pandemic, as governments in both developed and emerging economies ramped up borrowing. According to the Institute of International Finance (IIF), the total debt surge of $29 trillion in a single year primarily stemmed from advanced markets such as the United States, China, and Europe, driven by heightened government spending.
Debt-to-GDP Ratio Declines Despite Record Debt Levels
Despite the sharp rise in global debt, the debt-to-GDP ratio declined for the fifth consecutive year, reaching 308%. However, emerging markets recorded a significant increase in their debt levels, with net debt reaching $117 trillion in 2025. This pushed the debt-to-GDP ratio in these markets to a new high of over 235%.
Financial Conditions and Strategic Investments
The IIF report highlighted that easing financial conditions have supported efforts to mobilize capital for national priorities, including defense and investments in artificial intelligence (AI). However, this expansion has also raised concerns about rising indebtedness and potential overvaluation in certain sectors.
Refinancing Challenges for Developing Economies
Developing countries face refinancing needs exceeding $9 trillion in 2026, increasing the risks amid global liquidity fluctuations. Nonetheless, supportive financial conditions and strong international demand for high-yield investments could help mitigate some of these risks in the short term.
U.S. Bonds Remain a Safe Haven Amid Financial Concerns
Despite growing financial challenges, U.S. bonds continue to attract strong foreign demand, reaffirming their status as a safe-haven asset. The report noted that this trend contrasts with the prevailing narrative of foreign capital outflows from the United States amid efforts to diversify away from the U.S. dollar.
IMF Warns of Fragile Economies Amid Rising Debt
Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), voiced concerns about the fragility of global economies as debt levels rise. She emphasized the need for balanced financial policies to ensure long-term sustainability while addressing immediate economic priorities.
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