Kobeissi Letter Analysis: Global Debt Ratio Approaches Post-War Highs
The Kobeissi Letter cites IMF data indicating that the global government debt-to-GDP ratio is expected to rise to 102%, nearing post-World War II highs; it is currently around 94%, an increase of about 16 percentage points since 2015, with the U.S. and China contributing the majority of the increase.
The U.S. fiscal deficit remains at 7%-8% of GDP, with the debt ratio potentially rising to 142%; China's debt ratio is expected to rise to 127%, with the fiscal deficit approaching 8%. Meanwhile, against a backdrop of rising interest rates, global interest expenditure as a percentage of GDP is expected to increase from about 3% to around 5%.
The simultaneous rise in debt expansion and refinancing costs deepens the global economy's reliance on leverage for growth, while fiscal space continues to narrow.
Source: Public Information
ABAB AI Insight
This set of data's core issue is not "high debt," but rather the "changing structure of debt costs." For over a decade, the world has been in a low-interest-rate environment, where the marginal cost of debt expansion is extremely low, allowing governments to maintain high leverage through rolling financing without significantly increasing interest burdens. However, as interest rates rise, the debt issue shifts from a "stock size problem" to a "cash flow pressure problem."
The simultaneous push for rising debt by the U.S. and China indicates that the two major global economies are using fiscal expansion to counteract their respective structural pressures: the U.S. faces high welfare and industrial relocation costs, while China deals with slowing growth and the inertia of an investment-driven model. This transforms the global debt issue from a localized risk into a systemic phenomenon.
The increase in interest expenditure as a share of GDP essentially represents a reallocation of fiscal resources. More budget is allocated to debt repayment rather than investment or transfer payments, which compresses long-term growth potential and amplifies the constraints on fiscal policy. Historically, similar phases have often been accompanied by fiscal tightening, financial repression, or inflation redistribution.
On a deeper level, this marks a shift in the global economy from "growth-driven deleveraging" to "high leverage maintaining growth." Debt is no longer a cyclical tool but has become a structural pillar for maintaining economic operation. Should financing conditions tighten or growth further slow, systemic stability will increasingly rely on policy intervention and the monetary environment.