Global Debt Report 2025

Executive summary

Global debt markets face a difficult outlook. The pre-2022 dynamics of low rates and central bank support did not return in 2024. Bond yields in several key sovereign markets rose despite policy rates falling, while both sovereign and corporate indebtedness increased. This combination of higher costs and higher debt risks restricting capacity for future borrowing at a time when investment needs are greater than ever. Past borrowing, a legacy of the 2008 financial crisis and the COVID-19 pandemic, has been used primarily to facilitate recovery, leaving many long-term investment needs unaddressed. Meanwhile, certain corporate and emerging market issuers are finding market access highly challenging, complicating the mobilisation of funding. Against this difficult backdrop, which includes heightened geopolitical and macro-economic uncertainty, debt markets must meet the complex challenge of financing long-term, sustainable growth.

Sovereign and corporate borrowing rose in 2024 and looks set to continue rising in 2025.

Governments and companies borrowed USD 25 trillion globally from markets in 2024, nearly triple the amount in 2007. This increase is largely the legacy of the 2008 global financial crisis and the COVID-19 pandemic, in response to which large fiscal support packages, mainly funded via debt markets, helped avoid deeper recessions. Stricter banking rules and regulations to promote the use of market-based financing have also encouraged companies to rely more on bond markets. In 2024, sovereign and corporate bond debt together exceeded USD 100 trillion globally.

After a temporary dampening effect of inflation on debt-to-GDP (defined based on central government marketable debt), these ratios have begun growing again in several OECD countries. In the OECD on aggregate, it rose from 82% (USD 54 trillion) in 2023 to 84% (USD 55 trillion) in 2024. This figure is projected to grow further to 85% (USD 59 trillion) in 2025, more than 10 percentage points higher than in 2019 and nearly double the 2007 level.

Sovereign bond issuance in OECD countries is projected to reach a record USD 17 trillion in 2025, up from USD 16 trillion in 2024 and USD 14 trillion in 2023. Borrowing from markets has also increased sharply among emerging market sovereigns. Bond issuance rose from around USD 1 trillion in 2007 to over USD 3 trillion in 2024. Outstanding debt levels in emerging markets neared USD 12 trillion in 2024, up from USD 4 trillion in 2007.

The outstanding global stock of corporate bond debt also resumed its long-term growth path in 2024, following two years of inflation-induced real-term reductions that temporarily halted over 20 years of consecutive increases. At the end of 2024, global corporate bond debt amounted to USD 35 trillion, alongside USD 25 trillion of syndicated loans and at least USD 1.6 trillion of private credit.

Higher borrowing costs raise refinancing risks for sovereign and corporate issuers.

Today’s outstanding debt stock does not reflect the prevailing cost of new borrowing. Largely a legacy of the low-interest rate period, most outstanding debt carries a cost that is much lower than current market rates, and likely to be lower than the cost of borrowing going forward. At the end of 2024, over half of OECD sovereign debt, 30% of emerging market sovereign debt, 63% of investment grade corporate debt, and 74% of non-investment grade corporate debt had interest costs below the prevailing market rates.

As this debt is refinanced at higher rates, costs will increase. At the end of 2024, real ten-year yields were higher than both 2015-19 averages and 2023 levels in all but one OECD country with available breakeven inflation data. 2024 was also the first year since the initial occurrence in 2015 that no OECD country issued a bond with a negative yield. As a result, government interest payment to GDP ratios increased in about two-thirds of OECD countries in 2024, reaching 3.3% on aggregate, an increase of 0.3 percentage points compared to 2023. This means spending on interest payments is greater than government expenditure on defence in the OECD on aggregate.

Increases in interest payments tend to be gradual, since the total outstanding debt has been issued and will mature over decades. Nonetheless, between 2021 and 2024, interest costs to GDP increased from the lowest to highest level in the last 20 years, reflecting the speed of recent changes. Almost 45% of OECD countries’ sovereign debt will mature by 2027. This includes one-third of fixed-rate debt, 60% of which was issued before the post-2022 tightening cycle. This high near-term refinancing profile is partly a result of the increased issuance of treasury bills and the shortening of average maturities by certain large OECD issuers in the past few years. The equivalent share of outstanding debt maturing in the next three years in emerging markets is almost 40%. Low-income and high-risk countries face the greatest refinancing risks, with over half of their debt maturing during this period and more than 25% in 2025 alone.

Roughly one-third of all outstanding corporate bond debt will also mature by 2027, and the weighted cost is lower than end-2024 reference yields in every year until then, meaning corporate interest expenditure will increase unless yields fall sharply.

Since 2008, corporate bond issuance has grown significantly above trend, but corporate investment has not. Cumulative bond issuance by non-financial companies between 2009 and 2023 was USD 12.9 trillion higher than the pre-2008 trend, similar to the size of the entire current US corporate bond market. Meanwhile, corporate investment was USD 8.4 trillion lower. Rather than productive investment, much debt in recent years has instead been used to fund financial operations like refinancings (mentioned in 72% of prospectuses with non-generic use of proceeds information between 2000 and 2021, weighed by issue amount) and shareholder payouts (in 9% of prospectuses). This suggests existing debt is unlikely to “pay itself off” through returns on productive investment.

The dynamics sustaining current levels of investor demand for debt might not continue.

Central banks continued to withdraw from debt markets through quantitative tightening in 2024. If current levels of debt are to be maintained, either existing investors will need to buy more debt or new, likely more price-sensitive, investors will need to enter the market, which could increase volatility. Trends in 2024 suggest that households and foreign investors are taking up the reduced holdings of central banks. In OECD economies, central bank holdings of domestic sovereign bonds fell from 29% of total outstanding debt in 2021 to 19% in 2024, while domestic households’ share grew from 5% to 11%, and that of foreign investors from 29% to 34% over the same period.

The availability of sufficiently large and sustained foreign demand depends on the level and functioning of international financial flows. However, geopolitical tensions and trade uncertainties may lead to rapid changes in risk aversion that could in turn disrupt certain international portfolio flows. In corporate markets, shocks might be amplified by high levels of concentration across the issuer, investor and portfolio levels.

Achieving net-zero will require substantial increases in public and private investment.

The transition to net-zero is happening in this environment of high debt levels and high interest costs. The path to net-zero will look very different depending on whether the public or private sector finances most of the investment. In a scenario where the public sector provides the additional financing to meet investment requirements, the public debt-to-GDP ratio would rise by 25 percentage points in advanced economies and by 41 percentage points in the People’s Republic of China (China) by 2050. In emerging markets other than China, it would rise by 16 percentage points by 2040, beyond which further fiscal expansion may not be sustainable, necessitating more support from advanced economies.

If the private sector finances most of the investment, corporate borrowing would grow substantially, requiring the rapid development of capital markets. This is especially critical for bond markets for energy companies in emerging markets other than China, which would need to grow at an annual rate of 17% between 2024 and 2035, i.e. quadrupling in size in less than ten years.

In all three scenarios analysed in this report, energy sector corporate bond debt in emerging markets grows at about twice the rate of projected GDP, while it expands in line with GDP in advanced economies. If the private sector makes most of the investment and market-based financing levels in emerging markets converge with those in advanced economies, the bond debt of energy companies in emerging markets other than China would grow more than three times faster than projected GDP. These scenarios underscore the immense challenge of leveraging debt markets for the transition to a low-carbon economy. However, they also reaffirm the private sector’s potential role in driving this transformation. To enable this, financial regulation reforms will be essential, particularly to enhance capital market development in emerging markets.

If growth rates for public and private investment in the climate transition continue in line with recent trends, advanced economies will not be aligned with the Paris Agreement goals until 2041. The situation is even more difficult for emerging markets other than China, which would face a cumulative investment shortfall of USD 10 trillion to meet the Paris Agreement goals by 2050.

When every cent raised via debt markets costs more, quality investments must be prioritised.

Current shifts in debt markets are happening at a time when countries are increasingly focusing on enhancing their competitiveness through investments in infrastructure, the climate transition and digitalisation, including AI, as well as increasing defence spending. Given current conditions, meeting these needs will require sustained efforts to use debt markets as strategically as possible.

Despite a sharp rise in borrowing in recent years, corporate default rates have remained relatively low, and no major economy has defaulted or undergone significant debt restructuring. However, debt trajectories in recent years cannot be ignored. Many governments will likely need a combination of greater fiscal prudence, structural reforms to boost growth, and greater efficiency in public spending. Meanwhile, several sovereigns are shortening the maturity of their issuance to manage the supply of duration to markets, which can amplify already heightened refinancing risks. Issuers will need to remain flexible to meet demand where it exists but also limit risks in their debt portfolios.

Having used the low-rate era to prioritise financial operations, the link between corporate investment and borrowing has been partly severed. This impacts future growth prospects and therefore the ability to meet upcoming refinancing needs. Corporates will need to prioritise borrowing for spending that enhances productive capacity to better ensure the long-term sustainability of their debt, and governments should ensure they have the right incentives to do so.

Emerging markets need to develop their local capital markets to support growth and provide greater financial resilience. Those with larger domestic markets who borrow predominately in their own currency have fared better, while those with smaller markets who mainly borrow in foreign currencies are more exposed to changes in monetary policy elsewhere. Higher policy rates in the United States and the strength of the US dollar in the last few years have been particularly punishing for these issuers.

Finally, debt markets will play a critical role in financing the climate transition. Scenario analyses, which take into account key variables such as the growth of climate mitigation investments, international climate finance for developing countries, and foreign direct investment, underscore the impracticality of overreliance on either the public or private sector alone for this purpose.