Global debt surged to a record $348 trillion last year, marking the fastest annual increase since the pandemic, as governments in both advanced and developing economies significantly ramped up borrowing.

According to data from the International Financial Institute (IIF), total global debt, encompassing both public and corporate borrowing, rose by $29 trillion in 2025. Approximately two-thirds of this increase originated from developed markets, led by heightened deficit spending in the United States and Europe.

Despite the climb in outstanding debt, the debt-to-GDP ratio fell for the fifth consecutive year, dropping to 308%. However, in emerging markets, net debt reached $117 trillion in 2025, pushing the debt-to-GDP ratio to a new record high exceeding 235%.

"Loose financial conditions should help mobilize much-needed funding for national priorities such as defense financing and AI-related investments," wrote Emre Tiftik, Director of Global Markets and Policy at the IIF, economists, and senior research analysts in a report released Wednesday. "Nevertheless, the debt expansion intensifies concerns about rising leverage and overheating in certain market segments."

The report stated that developing nations face a refinancing requirement of over $9 trillion this year, amplifying risks amid fluctuating global liquidity conditions. For now, favorable financing conditions and strong international investor demand for attractive carry trades should help contain these risks.

Concurrently, despite heightened fiscal concerns, the U.S. Treasury market maintains its long-standing safe-haven appeal, supported by robust foreign demand for U.S. bond and equity assets.

"This contrasts sharply with recent narratives suggesting foreign capital is exiting the U.S. amid diversification and de-dollarization efforts," the report's authors noted.