Global debt hits record of near $353 trillion, with signs of move away from US

LONDON: Investors are showing signs of diversifying away from U.S. Treasuries as global debt levels hit a record of nearly $353 trillion by end-March, a report by the Institute of International Finance published on Wednesday found.

IIF’s quarterly Global Debt Monitor said that strengthening international demand for Japanese and European government bonds contrasted with broadly stable demand for U.S. Treasuries since the start of the year.

“These trends partly reflect diverging debt trajectories, which are increasingly influencing investor allocation decisions,” Emre Tiftik, director at the IIF for Global Markets and Policy, wrote.

“Under current policies, the U.S. debt-to-GDP ratio is expected to continue rising, and recent Congressional Budget Office projections indicate a further deterioration in the long-term fiscal outlook.”

READ MORE: Govt spending lifts global debt to a record USD348trn in 2025: IIF

This stood in contrast to debt ratios in the euro zone and Japan, which are projected to follow a more moderate path even with continued fiscal expansion, the report said.

However, U.S. corporate bond markets continue to boom, supported by AI-related issuance and strong overseas inflows.

Rising debt levels

Washington’s borrowing push was one of the main drivers for global debt to rise by over $4.4 trillion in the first quarter, the fastest increase since mid-2025 and the fifth straight quarterly increase, the IIF report said.

Tiftik said the rise in U.S. debt had been largely driven by government borrowing.

He pointed to a sharp acceleration in debt at the start of the year by Chinese non-financial corporate borrowers - predominantly state-owned firms - which significantly outpaced borrowing by the country’s government.

Outside the world’s two biggest economies, debt across mature markets edged lower, while emerging markets, excluding China, saw levels rising modestly to a record $36.8 trillion driven by government borrowing.

Looking at key debt ratios, global debt stood at 305% of world economic output, broadly stable where it had been since 2023. However, debt ratios followed a similar pattern as debt levels - trending lower in mature markets and rising steadily in emerging economies.

Overall, the biggest increases over the past quarter were recorded in Norway, Kuwait, China, Bahrain, and Saudi Arabia - each recording gains of more than 30 percentage points of GDP, the IIF report showed.

The IIF predicted that structural pressures – including aging populations, rising spending on defense, energy security and diversification, cybersecurity and AI-related capital expenditure - would push both government and corporate debt levels higher over the medium- to long-term.

“The recent conflict in the Middle East is set to further intensify some of these pressures,” Tiftik said.