Context:
Outstanding government and corporate bonds worldwide exceeded $100 trillion in 2024, according to the OECD‘s annual global debt report. Interest costs as a share of global output rose to their highest level in 20 years, reaching 3.3% of GDP among OECD member countries surpassing defence spending. The surge in borrowing costs poses challenges for governments and corporations, forcing them to prioritize productive, growth-oriented investments.
Debt and Interest Trends
| Key Indicator | Data Point |
|---|---|
| Total outstanding sovereign & corporate bonds | Exceeded $100 trillion in 2024 (nearly 3x 2007 levels) |
| Government interest spending (OECD members) | 3.3% of GDP — higher than defence spending |
| Sovereign & corporate debt maturing by 2027 | 40% of total debt |
| Share of low-income, high-risk countries’ debt maturing by 2027 | 50% within 3 years; 20% in 2024 alone |
| Dollar-denominated bond borrowing costs | Rose from 4% in 2020 to over 6% in 2024; 8%+ for junk-rated issuers |
Factors Driving Debt Concerns
- High borrowing needs for:
- Green transition
- Ageing populations
- Defence infrastructure (example: Germany’s new spending package)
- Central banks have started rate cuts, but interest rates remain well above pre-2022 levels.
- Large portions of low-rate debt are being replaced with more expensive debt.
Risks for Governments and Corporates
OECD cautions
“If borrowing adds expensive debt without boosting productivity, economies could face more difficult times.”
- Companies have increasingly used debt for shareholder payouts and refinancing rather than capital investments since 2008.
- Emerging markets, reliant on foreign-currency borrowing, face heightened refinancing risks and must develop local capital markets.
Climate Finance Challenge
- Emerging markets (excluding China) face a $10 trillion shortfall by 2050 to meet Paris climate goals.
- If governments finance this transition publicly, debt-to-GDP ratios could rise by 25 percentage points in advanced economies and 41 points in China by 2050.
Global Debt Growth Over Time
| Year | Global Public Debt (USD trillion) |
|---|---|
| 2010 | 51 |
| 2015 | 62 |
| 2020 | 84 |
| 2023 | 97 |
| 2024 | Over 100 |
Sovereign and corporate bond borrowing in 2024 was nearly three times higher than in 2007.
The global debt surge, coupled with rising interest costs and refinancing risks, places immense pressure on governments and companies to align borrowing with long-term productivity. The challenge is particularly severe for emerging markets and low-income nations, highlighting the urgent need for capital market development and responsible fiscal management.