The numbers
Global debt — including public debt (government borrowing), household debt and corporate debt — reached a record $307 trillion in 2023, according to the Institute of International Finance. This is approximately 330% of global GDP. During the pandemic, governments worldwide borrowed heavily to fund emergency support, and companies took on cheap debt in a low-interest-rate environment.
Why rising interest rates matter
For a decade after the 2008-2009 financial crisis, record-low interest rates made borrowing very cheap. The rapid rise in interest rates from 2022 onward — as central banks fought inflation — dramatically increased the cost of servicing this debt. Countries and companies that had borrowed at low fixed rates were insulated in the short term; those with floating-rate debt or needing to refinance faced immediate pressure.
The low-income country problem
Many low- and middle-income countries borrowed heavily during the low-interest-rate period, often from China as well as from Western multilateral institutions. As rates rose and their currencies weakened, the real cost of servicing dollar-denominated debt increased. By 2024, approximately 40 countries were in or near debt distress — unable to service their debt without reducing spending on healthcare, education or infrastructure.
Debt resolution challenges
The existing framework for sovereign debt restructuring — involving the IMF, World Bank, Paris Club of Western creditors and private creditors — is cumbersome and slow. The emergence of China as a major bilateral creditor has complicated negotiations, as China's terms and priorities differ from those of Western creditors, and agreeing common restructuring terms across creditor groups has proved difficult.