UAE government debt falls as global debt hits record $365 trillion

United Arab Emirates (UAE) government debt fell to 31% of gross domestic product in the second quarter of 2026, down from 32.9% a year earlier, the Institute of International Finance (IIF) said in its Global Debt Monitor.

According to Khaleej Times, global debt reached a record above $365 trillion, with emerging markets driving much of the rise.

How much government debt does the UAE have compared with its economy?

The IIF said the UAE's ratio was among the lowest recorded for major economies it tracks, even as borrowing rose elsewhere in the economy.

Financial-sector debt rose to 55.8% of GDP from 51.9%, non-financial corporate debt to 53.6% from 52.7%, and household debt to 25.8% from 24.2%.

How does UAE government debt compare with Saudi Arabia and the Middle East?

Saudi Arabia, by contrast, recorded a rise in government debt to 34.3% of GDP from 28.9% a year earlier. Financial-sector debt increased to 13% from 10.2%, while Saudi corporate debt rose to 46.6% of GDP from 45.2%. Household debt edged up to 31.7% from 31.2%.

The IIF said Saudi Arabia was among the largest emerging-market sovereign Eurobond issuers this year, alongside Mexico, Poland and Türkiye. Foreign-currency government debt in Saudi Arabia stood at 13.3% of GDP, with the entire amount denominated in U.S. dollars, according to the IIF.

Across the Middle East, government debt averaged 35.9% of GDP, up from 32.3% a year earlier. Kuwait recorded one of the region's largest increases, with government debt rising to 18.6% of GDP from 8.8%. Bahrain's climbed to 150% from 139.4%.

How much has global debt risen in 2026?

Worldwide debt increased by more than $10 trillion in the first half of 2026, taking the total to more than $365 trillion, the IIF said. The increase was less than half the $21 trillion rise recorded in the same period of 2025, as higher interest rates, elevated energy costs and the conflict with Iran weighed on borrowers, according to the institute.

Emerging markets accounted for $6.5 trillion of the increase, taking their combined debt above $110 trillion. Excluding China, emerging-market debt reached a record $38 trillion, the IIF said.

Global debt stood at about 310% of GDP, roughly 25 percentage points below its peak in early 2021. The IIF cautioned that the decline in the debt-to-GDP ratio largely reflected higher inflation and the resulting increase in nominal economic output, rather than a broad-based reduction in debt.

Why are government interest costs rising?

Higher borrowing costs are increasing the pressure on government finances in advanced economies. Average government borrowing costs across the Group of Seven were at their highest level since mid-2008, while annual interest expenses were about 85% higher, the IIF said.

Advanced economies paid more than $3.3 trillion in interest on internationally traded government bonds over the past year. That was higher than estimated global spending on defense, at $3.1 trillion, artificial intelligence at $2.6 trillion and clean energy at $2.3 trillion.

The IIF said persistent fiscal deficits in the United States, France, Britain and Japan were creating pressures increasingly associated with debt-heavy emerging markets. It also warned that elections, including U.S. midterm elections and national polls in France, Spain and Italy in 2027, could make fiscal consolidation more difficult.

Corporate borrowing is adding another layer of debt. U.S. non-financial corporate debt reached $24 trillion, driven in part by increased borrowing linked to artificial intelligence.

Private credit accounted for just over 5% of that debt, compared with about 1% in 2014. The IIF said there was little evidence so far that AI-related corporate issuance was crowding out government borrowing, although that could change if companies significantly increase the supply of long-dated bonds.

What are the global borrowing needs for the rest of 2026?

The IIF expects spending on healthcare, energy, artificial intelligence and information technology, as well as defence, to reach about $25 trillion this year, equivalent to roughly a fifth of global economic output. A growing portion is expected to be financed through financial markets, pointing to continued borrowing and bond issuance. Rising healthcare expenditure and public pension costs are expected to add further pressure to government budgets.

Emerging markets face more than $3.5 trillion in debt redemptions this year, a record amount, although financing conditions have remained relatively supportive. A weaker U.S. dollar has eased some pressure, while countries including Bolivia and Gabon have returned to international debt markets.

The IIF said governments should use the current financing environment to strengthen relations with investors. It identified Senegal's debt reprofiling under the G20 Common Framework as an important test for investor sentiment toward developing economies.

Meanwhile, the global environmental, social and governance debt market reached about $9 trillion by mid-September, up from $7.8 trillion at the end of 2025, with green bond issuance on track for a record year.