This jump is comparable to the COVID-era debt explosion in 2020, when governments and corporations worldwide dramatically ramped up spending to tackle the pandemic. (Picture credit: Reuters)
The Institute of International Finance (IIF) has reported that global debt reached an unprecedented $337.7 trillion in Q2 2025. Fueled by easier financial conditions and a weakening US dollar, the surge mirrors the pandemic-era spike in borrowing. Major economies like China, the US , France, Germany, and Japan led the increases, while emerging markets face mounting repayment pressures amid record-high bond redemptions.
Global debt has climbed to an all-time high of $337.7 trillion by the end of the second quarter of 2025, according to the latest Global Debt Monitor from the Institute of International Finance (IIF). The first half of 2025 alone saw an increase of over $21 trillion, largely driven by accommodative financial conditions, a softer US dollar, and continued government borrowing.
This jump is comparable to the COVID-era debt explosion in 2020, when governments and corporations worldwide dramatically ramped up spending to tackle the pandemic.
Countries Driving the Debt Spike
The biggest increases in debt were recorded in:
Some of these increases were magnified by currency movements, as the US dollar has weakened by nearly 9.8% in 2025 against a basket of major global currencies, inflating dollar-denominated debt.
Debt-to-GDP Ratios: Warning Signals
Debt-to-GDP ratios — a critical indicator of repayment ability — are showing worrying trends:
Bond Market Redemptions Looming
Emerging markets are under rising stress, with nearly $3.2 trillion in bond and loan redemptions due before the end of 2025. According to the IIF, this is the highest-ever redemption volume, creating pressure on governments and companies to refinance under tighter global financial conditions.
The report also warns of potential fiscal strains in developed economies such as Japan, Germany, and France, where debt ratios are surging.
US Debt: Reliance on Short-Term Borrowing
One of the IIF’s major concerns is the United States’ increasing dependence on short-term debt:
- Short-term borrowing now makes up about 20% of total government debt.
- Roughly 80% of US
Treasury issuance is in short-term maturities.
Analysts warn that such reliance could pressure central banks to keep interest rates artificially low, threatening their independence and raising risks of financial instability.
The Bigger Picture: Global Debt Outlook
The latest data highlights a growing disconnect between financial stability and rising debt. While accommodative conditions have allowed governments and corporations to refinance cheaply, the sheer scale of upcoming redemptions, particularly in emerging markets, poses significant risks.
The IIF cautioned that if borrowing continues at this pace, market sentiment could shift sharply, especially if investors — the so-called bond vigilantes — lose faith in government sustainability.
Key Takeaways:
- Global debt reached a record $337.7 trillion in Q2 2025.
- Debt surge mirrors COVID-era levels of borrowing.
- China, US , France, Germany, Japan, UK drove the largest increases.
- Emerging markets face $3.2 trillion bond redemptions in 2025.
- US reliance on short-term debt sparks concerns over monetary policy.
Would you like me to also create a “State-wise impact & India-specific angle” (like RBI’s debt-to-GDP, India’s fiscal borrowing, bond redemption stress) so it feels more localised for Indian readers?