Global debt: a snowball gathering momentum

Global debt has reached a critical juncture, expanding from $130tn in 2005 to $365tn in 2026. This debt has become a permanent feature of the global economy, with governments and businesses feeling increasing pressure. The 2008 crisis led to deleveraging in private and financial sectors, while low interest rates allowed for more borrowing.

By 2019, global debt had already reached dangerous levels, exacerbating the impact of the Covid-19 pandemic. Governments borrowed excessively to support incomes, businesses, and health systems as revenues plummeted, and companies and households also took on debt. Although inflation offered temporary relief by boosting nominal GDP and lowering debt ratios, it did not result in widespread debt reduction.

Today, public borrowing is increasingly significant, making up a larger share of the global total, while private-sector debt has eased from pandemic highs. Fiscal deficits, higher interest costs, and spending pressures are now central to the next phase. Governments must address demands from aging populations and healthcare, defense, energy security, and infrastructure, all while companies face new borrowing needs due to AI, data centers, and industrial investment.

The current debt cycle differs from the crisis-driven waves of 2008 and 2020, as borrowing is becoming more structural. Emerging markets are a primary driver of rising debt in 2026. However, higher interest rates are making each additional dollar of debt more expensive to service. The likely outcome is continued high—and potentially rising—debt, unless economic growth consistently exceeds borrowing.

The main pressure points are fiscal deficits, refinancing costs, and strategic investment. The real risk lies not in the absolute size of debt, but in the widening gap between servicing costs and the growth, productivity, and revenues necessary to sustain it.