Long-term data compilation shows that government debt in emerging market economies is about 78% of GDP, the highest level since data has been available since 1880. This ratio has more than doubled since the 2008 financial crisis and exceeds the peak of about 45% during World War II; it had never sustained above 60% before 2020 and is now approaching 80%.

Debt ratios in developed economies are about 108%, remaining above 100% for ten consecutive years. Before the crisis, this figure was below 80%. Kristalina Georgieva, President of the International Monetary Fund, stated at the Qatar Economic Forum in New York that global public debt is at a record high and could exceed 100% of GDP by 2029, two years earlier than previously expected, primarily due to the U.S. and China.

She compared the debt trajectory to stairs: it rises sharply during shocks and only slightly falls back or does not fall back after the shock. The Fund states that countries understand the need for fiscal consolidation but are taking insufficient action. The quality of monetary policy in emerging markets is now close to or better than that of some developed economies, yet the debt surge is occurring on the developed side.

By country, Japan exceeds 200%, the U.S. is about 124%, and France, Canada, the UK, and China are around 100%. Emerging markets have risen from about 39% to the 70% range since around 2010, doubling their share of global public debt; in 2024, interest payments in emerging markets are expected to be about $921 billion, with African countries having per capita interest payments of about $70, higher than education at about $63 and health at about $44.

The World Bank states that from 2022 to 2024, the gap between debt repayments and new financing for developing countries has expanded to $741 billion, the largest in at least 50 years, with external debt balances around $8.9 trillion. Interest costs have risen to near pre-2008 highs. The absolute scale of global government debt is estimated by institutions to be around $100 trillion.

Those buying are the sovereigns and local banks rolling over maturing debt, while those selling are domestic institutions and some official buyers still absorbing government bonds. Funds are continuously drawn away by deficit issuance, representing a fiscal pulse rather than a one-time crisis rescue. The beneficiaries are sovereigns with reserve currencies that can issue debt in the short term, while those under pressure are emerging fiscal entities where coupon payments have exceeded spending on health and education, as well as pension funds treating public debt as a risk-free asset.

The Fund will update global growth and inflation forecasts next month. The market interprets this set of ratios as a shift from emergency spending to a normal financing structure.

Source: Public Information