Global debt steadies at elevated levels as public borrowing rises, IMF says

Global debt stabilized last year at historically high levels, with a continued reduction in private-sector borrowing offset by increased government debt, according to the International Monetary Fund’s latest Global Debt Database update.

Total global debt stood just above 235% of gross domestic product (GDP), little changed from the previous year. In U.S. dollar terms, overall debt edged up to USD 251 trillion, with public debt rising to USD 99.2 trillion and private debt slipping to USD 151.8 trillion.

Private debt fell to under 143% of GDP, the lowest since 2015, driven by reduced household liabilities and stagnant borrowing by non-financial corporations. In contrast, public debt climbed to nearly 93% of GDP as fiscal deficits remained elevated.

The IMF noted that persistently high global fiscal deficits—averaging around 5% of GDP—continue to drive government borrowing. These deficits reflect lingering costs from the COVID-19 pandemic, such as subsidies and social benefits, alongside rising net interest expenses.

Country and income group disparities

Debt dynamics varied across regions and income groups. The United States and China, which remain pivotal in shaping global debt trends, saw diverging patterns.

In the U.S., general government debt increased to 121% of GDP from 119%, while private debt fell sharply by 4.5 percentage points to 143% of GDP, helped by strong corporate balance sheets and cash reserves.

China, however, saw public debt rise to 88% of GDP from 82%, and private debt increase six points to 206% of GDP, largely due to higher non-financial corporate borrowing despite weakness in the property sector. Household borrowing in China edged down as mortgage demand softened.

Excluding the U.S., public debt in advanced economies dropped by more than 2.5 points to 110% of GDP, with Japan, Greece, and Portugal leading the declines, offsetting increases in France and the U.K.

Excluding China, public debt in emerging markets and developing economies edged below 56% of GDP. Within these economies, private borrowing rose in Brazil, India, and Mexico but fell in Chile, Colombia, and Thailand. In Brazil, high interest rates worsened non-performing loans, while India’s stronger growth outlook spurred corporate borrowing.

Low-income countries saw debt shaped by weak financial development, tight liquidity, and crowding-out effects, where heavy government borrowing reduced private sector access to credit.

Crowding-out and policy guidance

The IMF observed that in many advanced economies, falling private debt alongside rising public debt signals potential crowding-out, where governments absorb credit that might otherwise go to businesses or households.

To manage these imbalances, the Fund urged governments to prioritize gradual fiscal adjustments within credible medium-term plans to reduce public debt, while ensuring private investment is not squeezed out. Creating an environment that boosts growth and reduces uncertainty, it said, will help ease sovereign debt burdens and encourage private-sector activity.