India, China fuel surge in global debt to $315 trillion 

Global debt rose by some $1.3 trillion to a new record high of $315 trillion in the first quarter of 2024, primarily driven by emerging markets including India, a report showed. 

The global debt-to-output ratio rose to hit 333% of gross domestic product (GDP) in the first quarter of 2024 after three consecutive quarters of decline, the Institute of International Finance (IIF) said on Tuesday in its quarterly Global Debt Monitor report.

A year ago, global debt stood at $307 trillion.

Government borrowings, which rose to 98.1% of GDP from 95.9% a year ago, powered global debt. 

This increase marked the second consecutive quarterly rise and was primarily driven by emerging markets, where debt surged to an unprecedented high of over $105 trillion—having more than doubled from $55 trillion more than a decade ago. 

The bulk of the debt buildup came from China, India, and Mexico, the study showed. 

In China, the government debt rose to 85.5% of GDP from 78.4% in Q1 2023.

In India, the debt burden spiked across sectors. 

In the year-ago quarter, debt as a percentage of GDP was 36.9, 54.3, 82.9, and 2.8 for  households, non-financial firms, government, and the financial sector, respectively. In 2024, they rose to 38.1, 56.2, 83.9, and 3.1, respectively. 

South Korea, Thailand, and Brazil saw the most significant declines in the dollar value of their total debt, data showed.

Total debt levels in mature markets remained broadly stable, as a reduction in debt by households and non-financial corporations offset the continued rise in government and financial sector indebtedness. 

The overall increase was primarily concentrated in the US and Japan, followed by Ireland and Canada, while the most significant declines were observed in Switzerland and Germany.

The study said that given “sticky” US inflation and an expected delay to Fed rate cuts, a dollar rally—with the ECB beginning to ease—could once again bring government debt strains to the fore, particularly for developing countries. 

“Although the relatively sanguine near-term global economic outlook is a positive factor for debt dynamics, stubborn inflation, particularly in the US, continues to pose a significant risk, putting upward pressure on global funding costs,” the report said. 

“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,” the IIF said. 

“Rising trade friction and geopolitical tensions also present significant potential headwinds for debt markets,” it added. 

Japan’s debt rise over 600% of GDP

The report pointed out that Japan is one of the world’s most heavily indebted countries, with total debt hovering over 600% of GDP—a staggering increase of over 60% points vs pre-covid levels. 

This surge in Japanese debt was the largest across major mature markets during this period. The general government accounts for the largest portion of Japan’s indebtedness. However, since the onset of the pandemic, debt buildup has been more pronounced in the financial sector, the report said. 

The study said that given that Japan’s financial institutions and the general government hold substantial amounts of foreign assets, the sharp depreciation of the Japanese yen against the currencies of its major trading partners should support Japan’s sovereign and corporate debt dynamics. 

However, a weaker yen could place additional pressure on household balance sheets by diminishing their purchasing power and could adversely impact household debt dynamics over the medium term.