Emerging market surge lifts global debt total to record above US$365 trillion

Global debt rose by more than US$10 trillion (HK$78 trillion) in the first half of 2026 to a record above US$365 trillion, driven largely by emerging markets, the Institute of International Finance said on Wednesday.

Debt in emerging markets climbed US$6.5 trillion to over US$110 trillion, led by China, while debt accumulation in advanced economies slowed sharply, the IIF said in its latest Global Debt Monitor.

The overall increase was less than half the US$21 trillion added in the same period a year earlier, as higher interest rates, rising debt-servicing costs, surging energy prices and the conflict with Iran weighed on borrowing. Governments and non-financial corporates accounted for most of the increase, with both sectors hitting new highs.

Global debt stood at about 310 percent of GDP, some 25 percentage points below its early-2021 peak, though the IIF said that largely reflected inflation lifting nominal GDP rather than genuine deleveraging.

The report comes as US Treasury yields have surged to multi-year highs, raising government refinancing costs. The benchmark 10-year yield has climbed to its highest since 2007, while the 30-year yield has reached levels not seen in nearly two decades.

Average government borrowing costs across Group of Seven economies were at their highest since mid-2008, while annual interest expenses were nearly 85 percent higher, the IIF said.

Advanced economies paid more than US$3.3 trillion in interest on internationally traded government bonds over the past year, more than estimated global spending on artificial intelligence of US$2.6 trillion, on defense at US$3.1 trillion or on clean energy at US$2.3 trillion.

EMERGING DEBT AND AI

Excluding China, debt across emerging and developing economies rose by about US$1.7 trillion in the first half to a record US$38 trillion.

Emerging market sovereign Eurobond issuance is running at a record pace, led by Mexico, Saudi Arabia, Poland and Turkey, while a softer dollar and continued carry trade supported demand for local-currency assets. Emerging markets face a record amount of debt coming due for repayment in 2026 of more than US$3.5 trillion.

The report also highlighted surging borrowing linked to AI investment. US non-financial corporate debt reached US$24 trillion, while private credit loans now account for more than 5 percent of that debt, up from roughly 1 percent in 2014.

The IIF said there was little evidence so far that AI-related borrowing had crowded out US Treasuries or emerging-market issuers, though growing long-dated corporate issuance could eventually add to upward pressure on long-term Treasury yields.

Reuters

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