Global debt climbed to a historic $337.7 trillion by the end of the second quarter of 2025, reflecting a sharp rise in government and corporate borrowing fueled by easier financial conditions, a weaker U.S. dollar, and more accommodative monetary policies from major central banks, according to the latest Global Debt Monitor released by the Institute of International Finance (IIF) on Thursday.
Contents
A Surge Comparable to Pandemic-Era LevelsDebt-to-GDP Ratios Rising in Key EconomiesGrowing Fiscal PressuresEmerging Markets Face Record RedemptionsU.S. Debt Dynamics Under the Microscope
A Surge Comparable to Pandemic-Era Levels
The IIF reported that global debt expanded by over $21 trillion in just the first six months of this year. Analysts noted that the pace of this increase was comparable to the spike seen in late 2020, when governments worldwide rolled out massive fiscal and monetary stimulus to counter the economic fallout of COVID-19.
Countries with the most significant debt increases in U.S. dollar terms included China, France, the United States, Germany, Britain, and Japan. Part of the surge was attributed to the nearly 10% decline in the U.S. dollar since the start of 2025, which inflated debt figures when converted into dollar terms.
Debt-to-GDP Ratios Rising in Key Economies
The report highlighted widening debt-to-GDP ratios — a measure of a country’s debt burden relative to its economic output — in several economies. Canada, China, Saudi Arabia, and Poland recorded the steepest increases. Conversely, nations such as Ireland, Japan, and Norway saw modest declines.
On a global scale, the debt-to-GDP ratio eased slightly but still remained above 324%, underscoring the heavy reliance on borrowing. In emerging markets, however, the situation was more concerning, with the ratio climbing to a record 242.4%, alongside total emerging-market debt surpassing $109 trillion.
Growing Fiscal Pressures
Emre Tiftik, Director of Sustainable Research at IIF, cautioned that heightened military spending and geopolitical tensions are expected to strain public finances further. Government borrowing has been the main driver of the debt buildup, particularly in G7 economies and China.
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At the same time, bond markets are showing heightened sensitivity. Yields on 10-year government bonds in the G7 have surged to their highest levels since 2011, reflecting investor concerns about long-term debt sustainability.
Emerging Markets Face Record Redemptions
The report warned that emerging economies will need to manage a record $3.2 trillion in bond and loan repayments during the remainder of 2025. Countries such as Chile and China experienced sharp increases in government debt, but market scrutiny has been more severe for advanced economies like Japan, Germany, and France, where investors — often referred to as “bond vigilantes” — are quick to offload debt they see as risky.
U.S. Debt Dynamics Under the Microscope
The IIF also raised alarms about the United States, noting that nearly 20% of total U.S. debt is short-term, accounting for around 80% of Treasury issuance. This heavy reliance on short-term borrowing could increase pressure on the Federal Reserve to keep interest rates lower for longer, potentially undermining its independence in setting monetary policy.
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