Global borrowing surged by $7 trillion in 2024, pushing total debt to a record-breaking $318 trillion, according to a report from the Institute of International Finance (IIF). This is the first time in four years that debt-to-GDP ratios have climbed, now reaching nearly 328%.
The United States, China, France, India, and Brazil were the biggest contributors, racking up massive amounts of new debt. The IIF warned that with economic growth slowing and borrowing costs still high, financial markets need to be on alert.
“The increasing scrutiny of fiscal balances—particularly in countries with highly polarized political landscapes—has been a defining feature of recent years,” said the IIF in its report.
Governments brace for bond market pressure
With debt levels this high, governments are under pressure. The IIF cautioned that investors, known as “bond vigilantes,” could start pushing up interest rates in an attempt to force countries to control their spending.
This has already happened before—market reactions to government debt levels have shaped political outcomes in multiple countries. “The increasing scrutiny of fiscal balances — particularly in countries with highly polarized political landscapes — has been a defining feature of recent years,” the IIF said.
“While market reactions to rising government debt levels in the US have been relatively muted despite its debt remaining on a ‘non-stabilization path,’ robust economic activity, productivity growth, and the safe-haven status of US Treasuries continue to mask the deepening weaknesses in U.S. fiscal balances. However, not all countries enjoy such privileges.”
But, of course, not every country has that privilege. The report pointed to the UK and France, where debt concerns have directly influenced political instability.
The UK saw the bond market turmoil help end Liz Truss’s brief tenure as Prime Minister in 2022, and in France, debt-related issues contributed to the fall of the Barnier government in 2024.
The situation in Germany is also changing a bit, with growing calls to amend the country’s “debt brake” rule, which the IIF has blamed for slowing down the country’s economy.
Despite the massive $7 trillion increase in 2024, this was still lower than the $16 trillion added in 2023. But the IIF says borrowing won’t stop anytime soon—government debt accumulation is expected to remain above $5 trillion in 2025, led by the US, China, India, France, and Brazil.
Developing markets struggle with rising debt burdens
Emerging markets are under immense pressure as their debt loads continue to grow, said the IIF. Total debt in these economies jumped by $4.5 trillion in 2024, pushing total emerging market debt to an all-time high of 245% of GDP.
The biggest issue is rising interest costs. Many of these economies now have to roll over a record $8.2 trillion in debt this year, with about 10% of it denominated in foreign currencies—a situation that could quickly turn dangerous if funding dries up.
The IIF report warned that some emerging markets are becoming less capable of managing their debt loads, with their debt-carrying capacity declining in recent years.
The difference in economic growth between underdeveloped and developed economies has become less pronounced, meaning governments now have fewer ways to manage their rising debt costs.
The countries that saw the biggest increase in debt-to-GDP ratios in 2024 were Sweden, Nigeria, China, Israel, and Saudi Arabia. Meanwhile, the biggest declines were recorded in Argentina, Türkiye, the Netherlands, Greece, and Ireland.
What makes the problem even worse is the fact that many emerging markets are not transparent about their actual debt obligations, making it harder for investors to assess risks.
The IIF emphasized that governments need to improve debt transparency to avoid liquidity crises, which could spiral into something much worse.
Geopolitics isn’t helping, either. The report pointed to rising trade tensions and the Trump administration’s decision to freeze US foreign aid, which includes cuts to USAID programs.
The IIF said these moves could create huge liquidity problems for some economies that rely on foreign assistance to help manage their debt obligations.
Looking ahead, the IIF expects global debt accumulation to slow in H1 2025, largely because of high uncertainty in global economic policy and rising borrowing costs. “With global economic policy uncertainty at record highs—exceeding levels seen at the peak of the pandemic—cautious borrowers may limit private sector demand for credit,” the report said.
Charles Kindleberger, an economic historian, had this pretty solid take on why the 1929 Great Depression was such a damn disaster. He basically said it was because the world’s economic system was unstable. Why? Because the UK didn’t step up to the plate, and the US didn’t want to, either. The world economy needs a leader, someone who’s willing to take on some risk to keep things running smooth for everyone else. Without that, things fall apart.
After World War II, the US was the one playing that role. From the debt crisis in Latin America in the 80s to the Asian Financial Crisis in the 90s and the global financial crash of 2008, the US was the go-to player for keeping the chaos in check. They took on the job of guiding the whole system, and, well, they got a lot of benefits from that.
But, here’s the kicker—China’s rise has made it harder for the US to keep that hegemonic role. Then, when the US basically said in Munich last week that it no longer has Europe’s back when it comes to security, it got everyone wondering: can we even count on them to keep the global economy stable anymore?
China’s economic struggles are also America’s
China, for its part, doesn’t exactly seem eager to take on this responsibility either. If anything, they’ve been stirring the pot with things like creating domestic deflation, which the rest of the world has to deal with. So, we’re left with no one big enough or willing enough to step up and take charge, which means we’re in for a shaky ride ahead.
Now, going back to Kindleberger’s point about the 1930s. Back then, the world was missing a stabilizer—someone to do three key things:
- Keep markets open so countries in trouble could sell their goods.
- Lend money to those countries when they needed it.
- Act like a global central bank, providing short-term loans in times of crisis.
Without that, you got a mess of protectionism, currency wars, trade spats, and one financial crisis after another, jumping from one country to the next.
And honestly, even today, the US doesn’t really want to do these things anymore. Under Donald Trump, the US got all into tariffs, and the idea of offering long-term financial aid turned into a “we need a return on this” thing—like how he treated American aid to Ukraine as an “investment” with some sort of financial payback.
The natural question is: why should the US foot the bill for everyone else? Fair point. But if the US isn’t going to step up, then who the hell will? If the answer is “no one,” then we’re right back in the 1930s and better start preparing for the mess that comes with it.
Sure, there are some things that make today a bit different. Like, floating exchange rates are here to act as a buffer against Trump’s tariffs, and as long as the US keeps consuming more than it produces, it’ll still be a market for the rest of the world. Plus, the Bretton Woods institutions like the World Bank and IMF are around to offer long-term loans to struggling nations. And countries like China have a ton of foreign currency reserves to use as a safety net.
But don’t get too comfy. The IMF didn’t exactly shine when it tried to bail out places like Greece, Ireland, and Argentina—so a big economy going under could wreck what little stability is left. Also, the US usually needs to take the lead for the IMF to even get moving, and, quite frankly, it’s hard to picture Asian countries coming together to help when things get rough. The US may have the power to keep the dollar strong and provide global liquidity, but when times get really bad, that’ll be put to the test.
Now, Kindleberger published his book in 1973 and, back then, he worried about the US losing its grip while Europe was on the rise. Looking back, that feels almost silly now—like, quaint. Fast forward 50 years, and here we are: the US and China playing tug-of-war for dominance, neither of them wanting to take on the responsibility of leading. The US is ready to lash out at anyone who challenges the dollar’s dominance, but at the same time, its own actions are casting doubt on whether it can keep that lead. Meanwhile, China is throwing a tantrum over its lack of status but is actively making the whole situation worse.
Ideally, we won’t have a massive crisis that requires global cooperation, but let’s face it: luck doesn’t last forever. It’d be smart to strengthen those international institutions and at least try to avoid getting into a position where we’re all relying on the kindness of strangers (which, let’s be honest, isn’t a great plan).
The G20 gets shunned
And then, on top of all that, the G20 is kinda falling apart. Finance ministers from major countries like India, China, Brazil, and Mexico are all skipping a meeting in South Africa, showing how much the group’s influence is slipping. Even US Treasury Secretary Scott Bessent is staying in Washington, following Marco Rubio’s lead of not wanting to “coddle anti-Americanism.” Japan’s finance minister is staying home to focus on budget talks, and the EU’s Valdis Dombrovskis is keeping things in Brussels.
People are starting to see the cracks in global cooperation, especially as US-China rivalry gets worse and the war in Ukraine makes things even more tense. The G20 used to be a powerhouse when it helped deal with the 2008 financial crisis, but now it’s more of a joke.
Bessent’s decision to skip the meeting has some people shaking their heads, saying it’s a big mistake, but Lesetja Kganyago, the head of South Africa’s reserve bank, is trying to downplay it. He’s all, “don’t worry, even if some finance ministers don’t show up, we’ve still got representation.” Sure, but it’s still a bad look.
Jay Powell, the head of the US Federal Reserve, is still going to show up, along with a bunch of other central bank leaders. But the US isn’t really showing the world that it’s committed to cooperation.
And to top it all off, the G20’s whole purpose this year is to get a consensus on what the global economy needs to survive, but with everything falling apart, that’s looking like a long shot.
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