- Global debt reached a record $307T in the second quarter of 2023, the Institute of International Finance (IIF) said on Tuesday.1
- The group representing the world's largest international banks and financial institutions reported that global debt in dollar terms had risen by $10T in the first half of the year and by $100T over the past decade.2
- According to the IIF, the global debt-to-GDP ratio increased to 336% for a second straight quarter, reportedly due to global inflation spikes, higher borrowing costs, and tighter lending.3
- In its Global Debt Monitor, the IIF said that over 80% of the latest debt build-up had come from developed countries, especially the US, Japan, the UK, and France. Among emerging markets, the most significant rises came from China, India, and Brazil.4
- The report comes ahead of the Federal Reserve's next interest rate decision, due on Wednesday, when the US central bank is expected to leave its benchmark rate.5
- Meanwhile, the US gross national debt exceeded $33T for the first time on Monday, amid the pursuit of a heavy borrowing and spending program by the Biden administration.6
- Narrative A, as provided by Imf. Rising debt has been a global concern for a while, and has become a more urgent one since the outbreak of the pandemic in 2019. A high debt-to-GDP ratio reduces space for fresh investment as more funds are directed toward debt-servicing, which hampers growth. Country-level structural reforms and international cooperation in taxation are required to help ease national finances.
- Narrative B, as provided by CNBC. While concerns over rising global debt must be paid heed to, it should also be noted that the effect of debt varies among nations, meaning that adjustment costs can vary. At the macro level, consumer debt remains largely manageable; central banks have retained some wriggle room and markets shouldn't be overly spooked.