Global Borrowing Hits Record $25 Trillion in 2024, Raising Debt Sustainability Concerns

A new report from the Organization for Economic Co-operation and Development (OECD) has revealed that global borrowing soared to a record $25 trillion in 2024, marking a $10 trillion increase from pre-pandemic levels. The surge in sovereign and corporate debt has fueled concerns over long-term economic sustainability, particularly amid rising borrowing costs and market volatility.

The OECD’s latest study, titled “Financing Growth in a Challenging Debt Market Environment,” highlights that the current borrowing levels are nearly three times higher than in 2007. Slower economic growth, persistent inflation, and geopolitical instability have forced governments and corporations to increase debt to maintain public services and fund operations.

Rising Debt and Market Pressures

OECD Secretary-General Mathias Cormann warned that rising sovereign and corporate debt levels are coming at a time of heightened borrowing costs and economic uncertainty. He urged policymakers to enhance public spending efficiency, focus on productive investments, and encourage businesses to expand capacity to mitigate financial risks.

Debt levels are expected to continue increasing into 2025, with the central government marketable debt-to-GDP ratio in OECD countries projected to hit 85 percent—more than 10 percentage points higher than in 2019 and nearly double the 2007 level.

“The increase in 2024 was the first since 2020, reflecting a slowdown in projected GDP growth to around 2 percent annually, down from over 4 percent in 2022-23 during the post-pandemic recovery,” the report noted.

Despite declining policy rates, bond yields in major markets have surged, exacerbating the challenges of high sovereign and corporate indebtedness. Rising borrowing costs are further limiting fiscal space for future investment at a time when substantial capital is needed to support economic growth, address demographic shifts, and fund defense and infrastructure projects.

Record Bond Issuance

Sovereign bond issuance across OECD countries is expected to reach a historic high of $17 trillion in 2025, up from $14 trillion in 2023. Total outstanding debt is forecasted to climb from $54 trillion in 2023 to nearly $59 trillion by 2025.

Emerging markets and developing economies have also witnessed a sharp rise in sovereign borrowing, with total debt issuance increasing from $1 trillion in 2007 to over $3 trillion in 2024. Notably, China accounted for 45 percent of all emerging market debt issuance in 2024, up from 17 percent in the 2007-2014 period.

By the end of 2024, global corporate bond debt is projected to reach $35 trillion, continuing a decades-long trend largely driven by non-financial companies, whose debt has nearly doubled since 2008.

Higher Borrowing Costs and Refinancing Risks

The OECD report highlights growing concerns over rising interest payments. In 2024, interest expenses as a share of GDP increased in approximately two-thirds of OECD countries, averaging 3.3 percent—up 0.3 percentage points from the previous year.

“This means that spending on interest payments now exceeds government expenditure on defense across the OECD,” the report stated.

Refinancing risks have also intensified, with nearly 45 percent of sovereign debt in OECD countries set to mature by 2027. Corporate bond markets face similar pressures, with about one-third of outstanding corporate bond debt scheduled to mature within the next three years. Refinancing this debt at higher interest rates could further strain public and corporate finances.

Debt Ownership Shifts and Market Volatility

Central banks continued their retreat from sovereign debt markets in 2024, reducing their holdings of domestic government bonds in OECD economies from 29 percent in 2021 to 19 percent in 2024. Meanwhile, domestic households increased their share from 5 percent to 11 percent, and foreign investors expanded their holdings from 29 percent to 34 percent. This shift to a more price-sensitive investor base could heighten market volatility, particularly if new investors demand higher yields.

Climate Financing Challenges

The OECD report also underscores the financial challenges associated with meeting global climate targets.

“If public and private investment in the climate transition continues at recent growth rates, advanced economies will not align with the Paris Agreement goals until 2041,” the study warned.

Emerging markets outside China face an even greater challenge, with an estimated $10 trillion investment shortfall needed to meet climate targets by 2050.

The report suggested that increasing public sector financing for climate initiatives could substantially raise public debt-to-GDP ratios. Alternatively, greater reliance on private capital would require significant financial reforms and accelerated capital market development, particularly in emerging economies.

“Financial regulation reforms will be essential, particularly to enhance capital market development in emerging markets,” the report concluded.

As global debt levels continue to rise, governments and corporations face mounting challenges in balancing growth, fiscal stability, and sustainable investments.