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Global Debt Hits New Record at $313 Trillion: IIF

Global Debt Hits New Record at $313 Trillion: IIF

In 2023, global debt reached a historic high of $313 trillion, with developing economies hitting a fresh peak in debt-to-GDP ratios, as reported by the Institute of International Finance (IIF).

This surge, exceeding $15 trillion year-on-year, was primarily driven by mature markets like the U.S., France, and Germany, which contributed around 55% of the increase.

Despite a decline in the global debt-to-GDP ratio to nearly 330%, some emerging markets such as India, Argentina, China, Russia, Malaysia, and South Africa witnessed a rise, indicating potential challenges in debt repayments.

The IIF warns of increased market volatility due to uncertainties surrounding U.S. policy rates and the U.S. dollar, particularly for countries heavily reliant on external borrowing.

However, despite these challenges, the global economy has shown resilience to borrowing cost fluctuations, resulting in a rebound in investor sentiment.

In 2024, there’s a growing trend of borrowing, particularly noticeable in emerging markets, as evidenced by increased international sovereign bond issuance volumes.

The year began with significant debt sales by countries like Saudi Arabia, Mexico, Hungary, and Romania, resulting in a record-breaking January issuance of $47 billion.

This positive sentiment is expected to reverse the ongoing deleveraging seen in European governments and non-financial corporates in mature markets since the pandemic onset.

However, the Institute of International Finance (IIF) expresses concerns about potential inflationary pressures leading to higher borrowing costs.

Geopolitical tensions are also flagged as a significant market risk, with increased fragmentation raising worries about global fiscal discipline.

Government budget deficits remain elevated, and any escalation in regional conflicts could prompt a sudden surge in defense spending.

The IIF emphasizes the need for vigilance regarding inflationary pressures and geopolitical risks. Government deficits are still high, and any escalation in regional conflicts could lead to increased defense spending. Maintaining fiscal discipline and monitoring borrowing costs are crucial in navigating these challenges.

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