Global debt rises to $307 trillion in Q3, 2023

InfoStride News reported on Thursday that global debt has surged to a historic high of $307.4 trillion in the third quarter of 2023, according to the Institute of International Finance (IIF). This marks a more than 25% increase over the past five years, and the financial services trade group anticipates that global debt will exceed $310 trillion by the end of the year.

The IIF highlighted the concerning debt-to-output ratio in emerging markets, which reached an unprecedented level. The institute also issued a warning that a shift towards political populism could further elevate debt levels in the coming year.

Emre Tiftik, the Director of Sustainable Research at the IIF, expressed concern about the growing portion of global revenues being allocated to debt servicing. He noted that in countries like Pakistan and Egypt, the servicing of debt has reached “alarming” levels. Projections for the United States indicate that 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 significant contributions from countries such as the United States, Japan, France, and the United Kingdom. Emerging markets, including China, India, Brazil, and Mexico, also experienced notable upticks in debt.

The global debt-to-GDP ratio, although relatively stable at 333%, saw a surge in emerging markets, reaching 255%. This marked a 32-percentage-point increase compared to the same period five years ago. The rise in this ratio was particularly driven by countries like Russia, China, Saudi Arabia, and Malaysia. Conversely, Chile, Colombia, and Ghana witnessed the most substantial declines in the debt-to-GDP ratio.

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

In addition to government debt, the IIF expressed concern about the escalating debt load for households and corporations in key economies like China and the United States. This trend could have implications for various aspects, ranging from elections to the transition to clean energy.

As InfoStride News brings attention to these alarming developments in global debt, it underscores the need for policymakers and financial institutions to closely monitor and address the challenges posed by the current trajectory of indebtedness worldwide.