A report by the International Finance Institute showed – yesterday, Tuesday, that the percentage of global debt to GDP increased last year for the first time since 2020, as the global debt balance recorded a new record at the end of 2024 amounted to 318 trillion dollars at a time when the global economy suffers from slowing down.
The global debt rose 7 trillion dollars last year, a less than half of the increase that occurred in 2023 when the expectations for reducing interest rates from the Federal Reserve (the US Central Bank) led to a wave of borrowing, but the International Finance Institute warned that those known as bond monitors They may be punished if the increasing financial deficit continues.
Increased scrutiny
The institute said that “the increased scrutiny of the financial balances, especially in countries with highly polarized political systems, was a prominent feature for the past few years.”
Market reactions to financial policies in the UK led to the end of the short term of Prime Minister Liz Terrace in 2022, and similar pressure in France led to the overthrow of Prime Minister Michelle Barnier last year.
The percentage of debt to gross domestic product – an indication of the ability to pay debts – approached 328%, an increase of 1.5 percentage points, and the levels of government debt of $ 95 trillion conflict with the slowdown of inflation and economic growth.
The institute said that it is expected to slow down debt growth this year, in the midst of unprecedented uncertainty in global economic policy and the costs of borrowing that are still high.
However, the institute warned that despite the high costs of borrowing and uncertainty in economic policy, its expectations may increase the increase in government debt by about $ 5 trillion this year due to demands for financial motivation and increased military spending in Europe.
“I think we will likely witness more fluctuations in the sovereign debt markets, especially in the countries where we are witnessing a great political polarization,” said Emer Tiftek, Director of Sustainability Research at the International Finance Institute.
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Debt renewal challenge
Emerging markets, led by China, India, Saudi Arabia and Turkey, contributed about 65% to the growth of global debt last year.
This borrowing – in addition to standard debts of $ 8.2 trillion dollars that emerging markets need to be renewed this year, of which 10% in foreign currency – exhausts the capabilities of countries to face the political and economic challenges that are looming on the horizon.
“The escalation of commercial tensions and the Trump administration decision to freeze US foreign aid, such as reducing the American Agency for International Development, may lead to great challenges in liquidity, reduce the ability to renew debts and reach them in foreign currency,” the report said.
The report added: “This emphasizes the increasing importance of filling in local revenues to build the ability to withstand in the face of external shocks.”
The Director of Sustainability Research at the Institute said that severe fluctuations confirm the need to increase the capabilities of multilateral development banks to mobilize the capital of the private sector.
A number of developing economies, such as Kenya and Romania, face difficulty in strengthening local revenues due to the popular anger at tax increases in the case of Kenya and the upcoming elections in the case of Romania.
