Global Debt Tops 365 Trillion Dollars as Emerging Markets Lead a 10 Trillion Dollar Rise
Global debt rose by 10 trillion dollars in the first half of 2026 to more than 365 trillion dollars, the Institute of International Finance said in its Global Debt Monitor published on 23 September. Emerging markets accounted for the bulk of the rise. The increase was less than half the 21 trillion dollar rise in the same period of 2025, which the report put down to rising interest rates, higher debt service costs, surging energy prices and the impact of the conflict involving Iran on issuer sentiment.
Governments and companies set new records
The slowdown was most visible among financial institutions and households, the sectors most sensitive to interest rates, but overall debt growth stayed above its 5 year average. Governments and non-financial corporates accounted for most of the increase, and both sectors reached record highs.
Emerging market debt hit a record above 235 percent of GDP, driven by elevated borrowing in countries including South Africa, Argentina and Egypt. In mature economies, nominal growth held debt ratios broadly steady or pulled them slightly lower. The US government debt ratio passed 122 percent of GDP, and China’s combined government and corporate leverage also set new records. Higher inflation has helped contain debt ratios, masking underlying vulnerabilities, the institute said.
The interest bill now outruns spending on AI and defence
Average government borrowing costs across the G7 are at their highest since mid 2008, according to the institute’s data, while yields on medium and long term government bonds in the United States, Japan, France and the United Kingdom have reached their highest in more than a decade, per CNBC. Advanced economies paid more than 3.3 trillion dollars in interest on internationally traded government bonds last year, more than estimated global spending on artificial intelligence, defence or clean energy.
| Measure | Trillion dollars | Period |
|---|---|---|
| Advanced economy interest on internationally traded government bonds | More than 3.3 | Last year |
| Estimated global spending on defence | 3.1 | Not stated |
| Estimated global spending on artificial intelligence | 2.6 | Not stated |
| Estimated global spending on clean energy | 2.3 | Not stated |
Estimates from the report.
The report singled out the United States, Japan, France and the United Kingdom for “persistently large deficits and rising interest expenses”, which it described as challenges long associated with emerging market sovereigns in debt distress. “As benchmark rates rise, interest expense is set to surge, while structural pressures from healthcare and public pension spending remain largely unaddressed,” it said.
A 25 trillion dollar spending wave
A chart in the report puts combined spending on healthcare, energy, AI and information technology, and defence on course for 25 trillion dollars in 2026. The report argues that debt has become more a political issue than a macro-financial one, warning of a “vicious cycle between elections and short-term quick fixes, and a long-term vulnerability as the marginal utility of higher debt diminishes”.
Why it matters: The report describes the largest advanced borrowers facing deficit and interest pressures once associated with distressed emerging market sovereigns, while emerging market debt is itself at a record. On our reading, that leaves less room on either side to absorb higher rates. Egypt is among the countries the report names as driving the emerging market increase.
Outlook: The next edition of the monitor will show whether borrowing kept its pace in the second half, and whether emerging markets continued to lead it.
Sources: Institute of International Finance, CNBC, Forbes.
