MARGRET ASUQUO
The global debt-to-GDP resumed its upward trajectory in the first quarter (Q1) of 2024, rising by some $1.3 trillion to a new record high of $315 trillion, a record of three consecutive quarters decline, the Institute of International Finance (IIF) said in its latest quarterly Global Debt Monitor report.
The IIF is the global banking industry’s premier trade group, with about 400 members from more than 60 countries across the world.
According to the report, a key measure of world indebtedness has resumed its climb as global debt hit a record high of $315 trillion in the first quarter of the year, fuelled by borrowing in emerging markets, the United States and Japan.
Debt in emerging markets, including Nigeria, grew to a record of more than $105 trillion – having more than doubled over the past decade according to IIF data.
The global debt-to-output ratio — a measure describing the ability of a borrower to pay back debt — rose to 333 per cent after three consecutive quarters of decline, the IIF said on Tuesday in its quarterly Global Debt Monitor report.
According to the report, the turnaround came as the dollar value of global debt surged by some $1.3 trillion quarter-on-quarter.
The largest contributors to the increase among emerging economies were China, India and Mexico. South Korea, Thailand and Brazil posted the largest dollar value declines in overall debt among the subgroup, the data showed.
“Government budget deficits are still higher than pre-pandemic levels and are projected to contribute around $5.3 trillion to global debt accumulation this year.
“Rising trade friction and geopolitical tensions also present significant potential headwinds for debt markets,” the report said.
Interest rates were expected to have started declining in the United States by now but sticky inflation has seen the Federal Reserve stand its ground.
“This has meant higher borrowing costs across the globe and, for many emerging markets, weakened currencies that further exacerbate the cost of servicing debt and could once again bring government debt strains to the fore,” the IIF said.
Egypt and Pakistan are seen as the emerging economies where the interest expense on government debt will be highest through 2026, with Pakistan set to spend above 50 per cent of revenue on interest and Egypt more than 60 per cent.
Among developed economies, the United States and Japan saw debt rise the quickest, adding 17 percentage points and 4 percentage points respectively.
Japan is expected to continue to spend on average under 2 per cent of government revenue in debt servicing through 2026, according to the IIF.
In the US, the figure is expected to rise above 10 per cent from the current 8 per cent and brush against 12 per cent in the same period.
Last month, the International Monetary Fund (IMF) warned that the US level of spending is “of particular concern” and “out of line with long-term fiscal sustainability”.
