Global Debt Tops $365 Trillion as Interest Costs Climb

WASHINGTON: Global debt rose by $10 trillion in the first half of 2026 to more than $365 trillion, and the cost of servicing it is now one of the biggest risks facing governments, according to a Sept. 24 report by CNBC on new research from the Institute of International Finance.

The Washington-based IIF, a global banking trade group, published its latest Global Debt Monitor on Wednesday, Sept. 23. It warned that governments are stuck in a "vicious cycle between elections and short-term quick fixes, and a long-term vulnerability as the marginal utility of higher debt diminishes."

Interest Bills Beat AI, Defense and Clean Energy

The IIF's most striking figure is about interest. Advanced economies paid more than $3.3 trillion last year in interest on internationally traded government bonds. That is more than estimated global spending on artificial intelligence ($2.6 trillion), on defense ($3.1 trillion) or on clean energy ($2.3 trillion).

The comparison is with each category on its own, not their combined total of about $8 trillion. Even so, it shows how much of the public budget in rich countries now goes to past borrowing rather than new priorities. The IIF also said average government borrowing costs across the Group of Seven are at their highest since mid-2008, Hong Kong's The Standard reported.

Four Major Economies Under the Spotlight

The IIF singled out four major economies: the U.S., Japan, France and the U.K. It said they face "persistently large deficits and rising interest expenses, challenges long associated with debt-distressed emerging market sovereigns." Yields on their medium- and long-term government bonds have hit their highest levels in more than a decade.

In the U.S., that squeeze is already visible. TradeFlock reported this week that government debt costs jumped as Treasury yields surged. In Britain, which has the highest borrowing costs in the G7, long-dated gilt yields have approached 6% this year, a backdrop the Bank of England weighed when it held rates at 3.75% on Sept. 17.

China and the U.S. Carry Half the Load

Where the debt sits explains who carries the biggest bill. The U.S. and China together account for about half of the world total. U.S. debt across government, households, companies and the financial sector rose $3.5 trillion in the first half to $111.8 trillion, the South China Morning Post reported from IIF data. China added more than $4.8 trillion, lifting its total to $72.5 trillion, by the paper's calculation.

Emerging-market debt overall climbed $6.5 trillion to more than $110 trillion, led by China, while borrowing in advanced economies slowed sharply. Excluding China, emerging and developing economies owe a record $38 trillion.

IMF and OECD Call for Spending Discipline

The IIF expects the pressure to build. "As benchmark rates rise, interest expense is set to surge, while structural pressures from healthcare and public pension spending remain largely unaddressed," it said.

The Organisation for Economic Co-operation and Development made a similar point in its economic outlook on Wednesday. Rising bond yields, it said, show the need to "contain and reallocate government spending, improve public sector efficiency and strengthen revenues."

International Monetary Fund Managing Director Kristalina Georgieva was blunter in a BBC interview this week. She said global shocks were "pushing debt levels up like a staircase not to heaven." Her prescription: "bring debt levels down, put fiscal consolidation as a priority, and make sure that the central banks deliver on their mandate for price stability."

IIF director Emre Tiftik told the South China Morning Post that this debt wave differs from 2008 or the pandemic because no single crisis drives it. Spending on healthcare, energy, AI and defense is structural, he said, so "debt is here to stay." That makes the interest bill, not just the headline total, the number to watch.