The world’s total debt climbed to nearly $353 trillion by the end of March, according to the Institute of International Finance (IIF), which on Wednesday published its quarterly Global Debt Monitor. The report indicates a growing reallocation by investors away from U.S. Treasuries and toward government bonds in Japan and Europe.
"These trends partly reflect diverging debt trajectories, which are increasingly influencing investor allocation decisions," Emre Tiftik, director for Global Markets and Policy at the IIF, wrote in the report. He added that "under current policies, the U.S. debt-to-GDP ratio is expected to continue rising, and recent Congressional Budget Office projections indicate a further deterioration in the long-term fiscal outlook."
The IIF contrasted the U.S. outlook with those of the euro zone and Japan, where debt ratios are projected to follow a more moderate path even as fiscal expansion continues. At the same time, U.S. corporate bond markets are described as booming, buoyed by issuance tied to AI-related projects and robust inflows from overseas investors.
Drivers of the increase
The report attributes more than $4.4 trillion of the global debt increase in the first quarter to Washington's borrowing, marking the fastest quarterly rise since mid-2025 and the fifth consecutive quarterly increase. IIF analysis noted that the rise in U.S. debt has been largely driven by government borrowing.
At the start of the year, Chinese non-financial corporate borrowers - predominantly state-owned enterprises - accelerated their borrowing sharply. That surge in corporate debt in China significantly outpaced borrowing by the Chinese government.
Outside of the two largest economies, debt in mature markets edged lower overall. Emerging markets excluding China, however, saw a modest rise in debt to a record $36.8 trillion, a gain the IIF says was driven by government borrowing.
Debt ratios and regional patterns
Measured against global economic output, total debt stood at 305% of world GDP, a level the report describes as broadly stable relative to where it has been since 2023. Still, the distribution of that debt is shifting: ratios have trended downward in mature markets while rising steadily across emerging economies.
Over the past quarter the largest increases in debt-to-GDP were observed in Norway, Kuwait, China, Bahrain, and Saudi Arabia, with each recording gains of more than 30 percentage points of GDP.
Medium- to long-term pressures
The IIF cautioned that several structural forces are likely to raise both government and corporate borrowing over the medium to long term. These include aging populations, rising defense spending, investments in energy security and diversification, growing cybersecurity expenditures, and capital spending related to AI, the report said.
On geopolitical developments, Tiftik noted that "the recent conflict in the Middle East is set to further intensify some of these pressures."
The IIF findings underline a changing global debt landscape: rising absolute borrowing, diverging trajectories across major economies, and shifting investor demand for sovereign debt. The report paints a picture in which fiscal and corporate financing needs, coupled with evolving investor preferences, will continue to shape capital flows and debt dynamics going forward.