More global debt: what are the implications?

May 2026, by Mário Pires

Access to credit can be crucial for realizing personal and professional projects, as well as for boosting economic growth. But when debt is excessive and mismanaged, it can become a risk factor.

Debt is considered sustainable when the activity it finances generates sufficient income to pay the respective interest and principal.. When this doesn't happen, debt can become an obstacle to growth and financial stability.

Record levels of debt and its relationship to GDP

Global debt includes public debt (of states), corporate debt, and household debt. In 2025, its value reached a record high of $348 trillion, an increase of $29 trillion compared with 2024, according to the Institute of International Finance. About two-thirds of the increase came from developed economies, and public debt accounted for another third of the increase (more than 10 trillion). 

Although high, these figures only take on real significance when compared with the value generated by the economy – namely, Gross Domestic Product (GDP). The greater the debt in relation to the wealth produced, the more difficult it will be to pay it off.

As regards global public debt, the International Monetary Fund (IMF) forecasts that it will exceed 100% of GDP by the end of the decade. This means that, on average, the debt accumulated by states will exceed the value of the annual wealth generated by their economies. And this is already happening in several major economies, including some that are benchmarks for international financial markets.

In the United States, for example, public debt exceeded GDP in 2013, when both stood at around $16.7 trillion, and by 2025, this debt (over $37.6 trillion) accounted for 124% of GDP. Japan, Canada, the United Kingdom, France and Italy are other countries where debt had exceeded 100% of GDP by 2024.

What does increased global debt mean?

These higher levels of global debt increase the risk of financial instability, and the consequences are felt at all levels:

• States: more debt means higher interest payments, fewer resources available for public investment, and less room to maneuver in critical or unexpected situations. When debt begins to be viewed as unsustainable, sovereign credit ratings deteriorate, pushing up spreads and increasing borrowing costs.
• Central banks: although the consequences may vary depending on the specific circumstances of each economy and the stage of the economic cycle, high levels of debt tend to limit the scope for action by central banks, which must balance inflation control with the impact of interest rates on the cost of public debt: Higher interest rates help to contain inflation, but they increase the cost of debt.
• For companies: the higher the overall and corporate debt levels, the more stringent financial institutions will be in granting credit, and the higher the interest rates and premiums demanded by investors, making financing more expensive and difficult to obtain. With strained balance sheets, the ability to invest (for example, in innovation and talent) is reduced.
• For families: in a context of systemic debt, households will also face tighter credit conditions, higher spreads, and stricter collateral requirements. Higher monthly payments, including on mortgages, reduce the ability to consume, save, and cope with unforeseen events.
• For investors: with rising volatility in bond markets and diverging trends in debt levels, inflation, monetary policy, and economic growth across different regions, it is increasingly important to actively analyze and manage the risk associated with each issuer, sector, and region, and to select those that represent opportunities, including bonds that are being excessively punished by the market.

The increase in global debt influences interest rates, credit conditions, and the cost of financing.. Prudent debt management, and the management of the risks and opportunities associated with it, is fundamental to ensuring future stability.