Government spending lifts global debt to a record $348 trillion in 2025, says IIF

• Governments added over $10 trillion to global debt, bringing total sovereign debt to $106.7 trillion, while corporate debt reached $100.6 trillion and household debt rose to $64.6 trillion
• Emerging markets face record 2026 refinancing needs exceeding $9 trillion, with their debt-to-GDP ratio hitting a record above 235%
• AI-related investments in data centers and infrastructure are driving a new corporate borrowing 'supercycle', while projected 3.3% global growth in 2026 is too moderate to significantly reduce debt-to-GDP ratios

Global Debt Hits Record $348 Trillion in 2025, IIF Reports

Key Findings:

Global debt surged to a record $348 trillion by end-2025, adding nearly $29 trillion during the year—the fastest annual increase since the pandemic. The Institute of International Finance (IIF) reports government borrowing now dominates debt accumulation, accounting for over $10 trillion of the rise.

Major Contributors:

The United States, China, and the eurozone were responsible for approximately 75% of the government debt increase. Government debt reached $106.7 trillion (up from $96.3 trillion in 2024), while non-financial corporate debt hit $100.6 trillion and household debt rose moderately to $64.6 trillion.

Market Composition:

Mature markets hold $231.7 trillion in total debt, with emerging markets at $116.6 trillion—both record highs. The debt-to-output ratio for emerging markets exceeded 235%, also a record. Notably, debt composition has shifted from private sector to sovereign leverage since pandemic peaks.

Refinancing Pressures:

Emerging markets face unprecedented 2026 refinancing needs exceeding $9 trillion, while mature markets must roll over $20 trillion in maturing bonds and loans. January 2026 saw record sovereign bond issuance as governments pre-funded budgets amid strong investor demand.

Growth Drivers:

AI-related investments are fueling corporate borrowing, with "supercycles" in AI data centers, energy infrastructure, and defense spending expected to drive continued debt accumulation. The IIF cites fiscal expansion, accommodative monetary policy, and regulatory simplification as key factors.

Outlook:

With IMF projecting 3.3% global growth in 2026, economic expansion appears insufficient to rapidly reduce debt-to-GDP ratios. The combination of persistent fiscal deficits, elevated borrowing, and record refinancing needs suggests debt will remain near historic highs, increasing vulnerability to interest rate shifts and investor sentiment changes.