Global debt hits all-time high of $313 trillion

WEB DESK: Global debt levels reached a new pinnacle, soaring to a staggering $313 trillion in 2023, as disclosed by a study that highlighted the escalation of developing economies in the ratio of debt to their gross domestic product (GDP).

The Institute of International Finance (IIF), a prominent financial services trade group, conveyed on Wednesday that global debt experienced a substantial surge, exceeding $15 trillion in the final quarter of 2023 compared to the same period the previous year.

Remarkably, almost a decade ago, the figure stood at approximately $210 trillion, according to the data.

The IIF’s Global Debt Monitor reported, “Around 55 per cent of this rise originated from mature markets, mainly driven by the US, France, and Germany.”

The document further indicated that the global debt-to-GDP ratio exhibited a decline of about 2 percentage points, settling at nearly 330 per cent in 2023.

While this reduction was particularly noteworthy in developed countries, some emerging markets witnessed a fresh high in the ratio, indicating a country’s capacity to repay debts.

Notably, India, Argentina, China, Russia, Malaysia, and South Africa recorded the most substantial increases, signalling potential challenges in debt repayments.

The report raised concerns about potential market volatility and tightened funding conditions for countries relying heavily on external borrowing, especially in the context of expected Fed rate cuts and uncertainty surrounding US policy rates and the US dollar trajectory.

Despite these challenges, the IIF emphasised the global economy’s resilience to borrowing cost volatility, leading to a resurgence in investor sentiment.

According to Reuters, the appetite for borrowing, particularly in emerging markets, has grown in 2024, as evidenced by the increased volumes of international sovereign bond issuance.

The beginning of the year, typically marked by busy debt sales, witnessed significant bond issuances, reaching an all-time record for January at $47 billion.

The IIF expressed optimism that if this positive sentiment endures, it could reverse the ongoing deleveraging by European governments and non-financial corporations in mature markets, both of which are currently less indebted than pre-pandemic levels.

However, the IIF voiced concerns about potential inflationary pressures leading to higher borrowing costs. Geopolitical factors were also highlighted as a “structural market risk,” with deeper fragmentation raising apprehensions about fiscal discipline worldwide.

The report underscored that government budget deficits remain elevated above pre-pandemic levels, and any acceleration in regional conflicts could trigger a sudden surge in defence spending.

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