Global Debt Soars to $318 Trillion, Risks Loom
The Institute of International Finance (IIF) released a report on February 25 revealing a striking figure: by December 2024, global debt had surged to $318 trillion, setting a new historical high for the same period. Behind this data lies a reflection of the complex fiscal and financial dynamics within the global economic landscape.
In recent years, global debt has been on a persistent upward trajectory. The $318 trillion debt figure highlighted in the IIF report undoubtedly sounds an alarm for the global economy. Judging by the growth trend, this escalation is no coincidence. In the process of global economic recovery, countries have widely adopted expansionary fiscal policies to stimulate growth. Massive funds have been channeled into infrastructure development, social welfare programs, and corporate support, aiming to boost domestic demand, promote employment, and drive industrial upgrading.
However, while such expansionary fiscal policies may inject short-term momentum into economic growth, they also carry the long-term risk of rapidly escalating government debt. In many countries, political parties advocating aggressive fiscal expansion have gained influence, leading to ever-increasing fiscal expenditures. Governments have resorted to issuing bonds and other means to raise funds, meeting the growing demand for public spending. This directly fuels the rapid expansion of government debt, posing severe challenges to fiscal sustainability.
The rise in global debt has multifaceted implications for financial markets. On one hand, massive debt increases credit risks in the market. As debt levels climb, the likelihood of government and corporate defaults rises correspondingly. Any default event could trigger panic in financial markets, erode investor confidence, and lead to capital outflows, thereby destabilizing the financial system. On the other hand, ballooning debt also constrains monetary policy. To alleviate debt burdens, governments may lean toward maintaining lower interest rates to reduce interest payments. Yet, a low-rate environment risks fueling inflation, leaving central banks in a dilemma when formulating monetary policies.
From an industry perspective, the impact of rising debt varies across sectors. For the real estate industry, increased debt may drive up financing costs, strain developers' cash flows, and ultimately affect housing supply and prices. For the financial sector, heightened risks compel institutions to tighten risk management and credit policies, which could worsen financing conditions—especially for small and medium-sized enterprises (SMEs), potentially facing even greater funding challenges.
Confronted with the relentless expansion of global debt, countries must collaborate to seek solutions. On one hand, governments should strengthen fiscal discipline, optimize spending structures, and improve fund utilization efficiency to avoid reckless fiscal expansion. On the other hand, economic restructuring and transformation should be accelerated to enhance the quality and sustainability of growth, thereby bolstering debt repayment capacity. Meanwhile, the international community must enhance cooperation in financial regulation to jointly address global debt risks and safeguard market stability.
The surge in global debt to $318 trillion serves as a stark reminder to governments and financial market participants: while pursuing economic growth, they must prioritize debt risk management and implement effective measures to ensure the steady development of the global economy.
