Global debt hits $312 trillion, but climate finance remains a challenge

Global debt hit a record high of $312 trillion at the end of the second quarter, boosted by borrowing in the US and China, while a key measure of emerging market debt also hit a new high , according to data from a banking trade group.

The Institute of International Finance (IIF), a financial services trade body, said on Wednesday that global debt rose by $2.1 trillion in the first half of the year to $312 trillion, a new high after earlier data was revised downward.

Read also: Gemini needs to deal with important issues, but Sagittarius needs to review plans; Daily forecast for August 26 for all signs

In its latest Global Debt Survey report, the IIF warned of a growing government borrowing trend, predicting that global government borrowing will rise from the current level of $92 trillion to $145 trillion by 2030 and will reach $440 trillion by 2050.

“The FED’s new easing cycle is expected to accelerate the pace of global debt growth, and the apparent lack of political will to address rising levels of public debt in advanced and emerging economies is a factor a serious concern,” the IIF report said.

Much of the borrowing was driven by the energy transition in response to climate change, which is expected to account for more than a third of expected growth by 2050.

“This is a major challenge, as many governments are already shifting an increasing proportion of their income to interest expenditure,” the report said.

BIG DUTY, BIG LOAN

The increase is $2.1 trillion this year through June compared to $8.4 trillion in the first half of 2023, according to the IIF.

In addition to China and the US, India, Russia and Sweden increased their debt, while other European countries and Japan saw significant reductions, the report said.

The global debt-to-GDP ratio – a measure of the ability to pay back debt relative to output – has settled at around 327%-328%, with output figures partly boosted by inflation above target in key countries.

In developed markets, the ratio reached its lowest level since 2018, driven by a decline in borrowing by households and the non-financial corporate sector.