Global debt rose by $7.5 trillion to a new record high of over $324 trillion in the first quarter of 2025, according to the latest Global Debt Monitor report from the Washington-based Institute of International Finance (IIF).
“While the sharp depreciation of the U.S. dollar against major trading partners contributed to the increase in the USD value of debt, the Q1 rise was more than quadruple the average quarterly increase of $1.7 trillion observed since the end of 2022,” said the report.
“The largest contributions to the Q1 2025 debt surge came from China, France, and Germany, while debt levels declined in Canada, the UAE, and Türkiye. With a pickup in bond issuance, the rise was most pronounced among non-financial corporates, followed by governments.
“As a share of GDP, global debt continued to edge down — albeit marginally — and currently stands near 325%. This modest decline was driven by mature markets.
“In contrast, total debt in emerging markets rose by over $3.5 trillion in Q1 2025, reaching a new high of more than $106 trillion and pushing the EM debt-to-GDP ratio to an all-time high of 245%.
“The increase was largely driven by China, which alone accounted for over $2 trillion of the rise. China’s government debt has surged in recent years, rising from 60% of GDP in 2019 to over 93% at present.
“Outside of China, total EM debt also reached a new high. Brazil, India, and Poland saw the largest increases in the USD value of debt in Q1 2025 …”
The IIF added: “A particular concern is the trajectory of U.S. government debt. With the U.S. administration planning to extend the 2017 tax cuts (and exempt taxes on tips and overtime payments), the anticipated surge in U.S. Treasury issuance is likely to have a far-reaching effect on global debt and credit markets, given the dollar’s reserve currency status.
“This could significantly dampen global risk sentiment, which has already shown signs of deterioration amid renewed trade tensions this year — though not yet to the extent seen during previous episodes of market stress such as the COVID-19 shock or the onset of the Russia-Ukraine war—thanks largely to the strong health of corporate and household balance sheets, where debt ratios re- main at multi-year lows.
“If the provisions of the 2017 tax act were extended indefinitely without accompanying revenue mobilization measures — such as tariffs — recent CBO figures suggest that U.S. government debt could rise from its current level of around 100% of GDP to nearly 130% by 2034 and over 180% by 2044.
“This would represent increases of 15 percentage points (or $5.8 trillion) and 44 percentage points (or $24 trillion), respectively, com- pared to a scenario without this extension.
“On top of this, estimates suggest that excluding tips and overtime pay from both income and payroll taxes would cost around $1.4 trillion over the 10-year budget window through 2034 — implying that the U.S. government would need to borrow an additional $7.2 trillion over 10 years.
“Such a sharp rise in the supply of U.S. Treasuries would put upward pressure on yields and significantly increase government interest expense, which already stands at 3.1% of GDP. In such a scenario inflation risk would also rise.
“This alarming debt trajectory has been a key driver behind the U.S. administration’s efforts to identify new revenue sources, including the introduction of tariffs, the launch of the Department of Government Efficiency (DOGE), and the talks around ‘Gold Card’ program, which would offer U.S. legal permanent residency to immigrants in exchange for a $5 million payment. However, these measures have so far raised more ques- tions than confidence regarding their effectiveness as credible debt stabilization tools.
“For example, estimates suggest that a universal 10% tariff could raise around $1.7 trillion by 2034 — covering only about 20% of the projected increase in government borrowing needs resulting from the permanent extension of the tax cuts and proposed new tax exemptions over the 10-year budget window. However, there is also the possibility that such a tariff could ultimately reduce government revenues if it triggers foreign retaliation.
“As for DOGE, it is currently on track to achieve annual government savings of about $160 billion — well below the original $2 trillion annual target. President Trump’s recent recom- mendations to cut discretionary funding for FY2026 were broadly based on DOGE’s recommendations. At this pace, cu- mulative savings from DOGE could reach roughly $1.6 trillion by 2034, covering about 20% of the anticipated increase in borrowing needs stemming from the planned tax exemptions …”