Global debt surpasses $324 trillion – is the world facing a debt bomb?

Jonathan Edwards
The Institute for International Finance released a report last month indicating that global debt in the first quarter of 2025 increased by $7.5 trillion to a new record high of $324 trillion.
In the first quarter of this century, global debt has more than quadrupled. In comparison, global GDP in 2024 was an estimated $110 trillion per annum. Accumulatively therefore governments, households and businesses have borrowed approximately three times economic output.
Furthermore, analysts have reduced global economic growth projections for 2025 to 2.5%, a 0.4% decrease compared to 2024. At the risk of sounding like a doom prophet, none of these figures sound particularly sustainable.
Meagre levels of economic growth are being financed by accelerating levels of debt.
Financial crash
Two seismic events this century have exacerbated matters. Firstly, the great financial crash in the first decade of the century and the policy response of Central Banks to put their respective economies on the life support of ultra loose monetary policy. Its impact was to encourage borrowing across all sectors, particularly amongst households in western countries who had to take on ever increasing mortgage debt.
This was followed by the pandemic which required an expansive fiscal response by governments to support lockdown policies.
Geopolitical instability is also a key factor resulting in increased arms spending, humanitarian support, commodity inflation and trade dislocation. Throw in US trade war strategy and reciprocation and it is not difficult to conclude that a reckoning is coming sooner rather than later.
It’s not just developed countries facing the strain: the International Monetary Fund estimates that 60% of low-income countries are in a precarious position.
Although their proportion of government debt is far less than more advanced countries, the poorest nations on earth pay a far higher premium on their debt. A United Nations report indicates that 3.3bn people live in countries who spend more on debt interest than on education and health.
Trump trough
Financial markets happily ticking along, despite the Trump trough, is not an indication that everything is OK. As economic history tells us, when confidence evaporates everything can collapse like a pack of cards.
The severity of the situation will require careful handling and global coordination as any solution will inevitably require debt restructuring if a soft landing is to be secured as opposed to a faceplant.
The populist right has developed a narrative for the times based on economic nationalism. It is most definitely the wrong prognosis and diagnosis; however, politics is fought in perception and not fact.
Progressives face an unenviable challenge of composing a narrative for the global situation which domestic populations can grasp and support – otherwise they will be left defending a doomed status quo.
Jonathan Edwards was the MP for Carmarthen East and Dinefwr 2010-24
Support our Nation today
For the price of a cup of coffee a month you can help us create an independent, not-for-profit, national news service for the people of Wales, by the people of Wales.
…and with the UK comfortable in the top 20. It won’t be long before this country goes bust, has to appeal (again) to the IMF. Then the public sector will be forcibly decimated and those gold-plated pensions will be slashed.
That would be a great outcome because the IMF would insist on the UK rejoining the single market and customs union.
Have you seen the state of the EU’s finances?
What’s that got to do with removing the red tape and bureaucracy getting in the way of trading with the largest and richest single market in the world?
Why doesn’t this discussion include the billions and billions of wealth thats concentrated in the very few hands of the mega wealthy? And why are so many countries allowing this to happen? It’s a recipe for disaster.
Global debt is a big fudge. The real problem is where consumers/households have got into deep debt to secure homes and those things that enable them to live their lives to varying degrees of comfort. The big question is who holds that debt, who can call it in if they so wish or vary the terms of loans ? That is real pain. Government debt is a hotch potch of bonds held largely by institutions and the governments’ own machinations with issuing money/credit to keep the pot boiling and calling it debt. The mess of 2008 and onwards just made… Read more »