Global debt tops $365 trillion as economists sound alarm over 'vicious cycle'

• Advanced economies paid over $3.3 trillion in interest on government bonds last year, exceeding global spending on AI ($2.6 trillion), defense ($3.1 trillion), or clean energy ($2.3 trillion)
• Major developed economies now face challenges typically associated with debt-distressed emerging markets, as yields on medium- and long-term bonds hit decade-high levels
• IMF chief Kristalina Georgieva emphasized the urgent need for politically difficult but necessary steps to bring debt down and achieve fiscal consolidation

Global Debt Reaches $365 Trillion as Economists Warn of Fiscal Crisis

Key Findings:

Global debt surged by $10 trillion in the first half of the year to exceed $365 trillion, according to the Institute of International Finance (IIF). The Washington-based organization warns that governments are trapped in a "vicious cycle" of large deficits, rising interest expenses, and insufficient political will to address the crisis.

Major Economies at Risk:

The U.S., Japan, France, and the U.K. face challenges typically associated with debt-distressed emerging markets. These four economies are experiencing persistently large deficits and rising interest expenses amid yields on medium- and long-term government bonds reaching decade-high levels.

Staggering Interest Costs:

Advanced economies paid over $3.3 trillion in interest on internationally traded government bonds last year—exceeding global spending on AI ($2.6 trillion), defense ($3.1 trillion), and clean energy ($2.3 trillion).

Expert Warnings:

IMF chief Kristalina Georgieva emphasized the urgency of the situation, stating it is "impossible to stress strongly enough how critical it is" to reduce debt levels and prioritize fiscal consolidation. She warned that economic shocks are "pushing debt levels up like a staircase not to heaven."

Market Implications:

Rising bond yields reflect growing investor concern over elevated interest rates, persistent energy costs, and high fiscal spending. The IIF notes that debt has become politicized, creating short-term fixes while long-term vulnerabilities grow as debt effectiveness diminishes.

The OECD echoed these concerns, calling for reforms to contain government spending, improve public sector efficiency, and strengthen revenues to ensure debt sustainability and economic resilience against future shocks.