Global debt reaches new records ahead of the IMF-World Bank Annual Meetings

The Institute of International Finance (IIF) reported on 23 September that global debt reached USD 365.5 trillion at end-June, equivalent to around 310–311 percent of global gross domestic product (GDP). Emerging markets accounted for roughly USD 6.5 trillion of the increase during the first half of the year, taking their combined debt to USD 110.6 trillion. The figure includes public, household, financial-sector, and non-financial corporate debt, but governments face the clearest policy constraint, as higher interest costs compete directly with defence, infrastructure, energy, and social expenditure.

That pressure intensified after the report. The US 10-year Treasury yield reached around 5.34 percent on 1 October, its highest level since 2002, while long-term borrowing costs also rose sharply in the United Kingdom, France and Japan. Mature-market governments already spend more than USD 3.3 trillion annually on interest linked to internationally traded government bonds. The impact enters public finances gradually as older debt matures and governments refinance at current rates. Countries that shortened maturities during the earlier rise in borrowing costs face more frequent rollover requirements and faster transmission into their budgets.

Several spending pressures point to a durable demand for capital. Governments are financing higher defence budgets, energy security, infrastructure and industrial policy while ageing populations raise recurrent expenditure. Major technology companies are simultaneously raising large amounts for artificial intelligence (AI) infrastructure; Alphabet, Amazon and Microsoft have issued around USD 220 billion in debt during 2026. The Iran war has reinforced inflation pressures through higher fuel, freight and insurance costs, limiting the scope for rapid monetary easing. These pressures place governments and large companies in direct competition for capital at a time when global debt stocks are already elevated.

The impact varies sharply according to who holds the debt, its currency, maturity profile and the government’s ability to refinance domestically. Egypt illustrates the constraint. Public debt stands at around 91 percent of GDP, while gross financing requirements remain close to 42 percent of GDP. Interest payments have absorbed around 73 percent of government revenue at points. Tighter market conditions have also pushed the government towards shorter-duration domestic issuance, increasing the frequency of refinancing and leaving fiscal policy more exposed to changes in local and global interest rates.

Senegal faces a different problem as central-government debt is around USD 44 billion, while broader public liabilities are close to 130 percent of GDP. More than USD 11 billion in previously misreported obligations and the use of total-return swaps have complicated the assessment of the state’s actual liabilities. Multilaterals, bilateral lenders, Eurobond investors and regional institutions carry different claims and may receive different treatment during any future debt operation. The Senegal case shows how transparency, collateral structures and creditor hierarchy can increase borrowing costs before repayment capacity itself deteriorates.

South Africa provides a more resilient model within the current cycle. Deep domestic capital markets, pension funds and institutional investors reduce dependence on immediate external refinancing and have helped local-currency debt absorb the latest global sell-off more effectively than several developed-market sovereign bonds. That protection carries its own concentration risk as banks and pension funds hold larger volumes of government debt, linking sovereign borrowing more closely to domestic financial stability.

Gulf states sit at the other end of the spectrum. Saudi Arabia raised USD 3.25 billion through an international sukuk in September and attracted about USD 16.5 billion in orders despite regional conflict and higher global yields. Oil revenues, sovereign assets and broad access to domestic and international markets allow debt to preserve liquidity and sustain investment programmes. The current refinancing cycle therefore widens the difference between governments that retain multiple funding options and those whose debt-service burden increasingly dictates budget choices.

African governments raised more than USD 14 billion in international markets during the first half of 2026, including more than USD 10 billion in sub-Saharan sovereign issuance. Recent borrowing by Côte d’Ivoire, Benin and Kenya carried average coupons of about 8.5 percent, implying roughly USD 4 billion in interest costs over the life of those bonds. A large share of current issuance supports budget financing, refinancing, and maturity management, providing short-term liquidity while committing future revenue to higher debt-service costs.

The return to Eurobond markets comes as concessional finance contracts. Organisation for Economic Co-operation and Development (OECD) donor assistance fell 23 percent in 2025, while aid to Africa fell by more than 25 percent. Governments therefore face higher commercial borrowing costs at the same time that access to cheaper external finance has weakened. Domestic borrowing offers another route, but greater reliance on banks, pension funds and local investors increases the exposure of national financial systems to sovereign debt.

African policy debates have accordingly moved towards the structure and governance of sovereign finance. Governments and regional institutions are giving greater attention to the pricing of African debt, the treatment of productive investment in debt-sustainability assessments, the role of credit ratings, the position of African multilateral lenders and coordination among borrowing countries. The African Borrowers’ Platform, work on an African Borrowing Charter and efforts to deepen regional capital markets reflect a broader attempt to increase influence over financing terms while preserving access to global markets and multilateral support.

The IMF and World Bank enter their 12–18 October Annual Meetings with several reforms already in motion. The revised Low-Income Country Debt Sustainability Framework gives greater weight to domestic borrowing and contingent liabilities. The Three-Pillar Approach targets countries whose debt remains sustainable but whose servicing costs restrict investment and growth. The IMF’s September programme-design review also places greater emphasis on contingency planning and repeated external shocks. These changes address weaknesses that are already visible in Egypt, Senegal and several African market-access countries.

Debt workouts now require coordination among the IMF, World Bank, China, Paris Club creditors, bondholders, domestic banks and regional institutions. The September Group of Twenty (G20) finance meeting exposed continuing disagreement over burden-sharing and sovereign restructuring, which could slow action as more governments seek liquidity support or maturity relief. The most consequential outcome from the October meetings would be a credible mechanism that can lower refinancing pressure while countries still retain market access. Without that bridge, the current cycle will continue to separate states that can absorb higher rates from those forced into progressively shorter borrowing, deeper fiscal compression and eventual restructuring.