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Pakistan is seen as an emerging economy where the interest expense on government debt will be highest through 2026, with the country set to spend above 50% of revenue on interest, the Institute of International Finance (IIF) said on Tuesday in its quarterly Global Debt Monitor report.

A key measure of world indebtedness has resumed its climb as global debt hit a record high of $315 trillion in the first quarter of the year, fuelled by borrowing in emerging markets, the United States and Japan, the study showed.

Global debt hits new record high at $313 trillion: IIF

The global debt-to-output ratio - a measure describing the ability of a borrower to pay back debt - rose to hit 333% after three consecutive quarters of decline, it added.

The turnaround comes as the dollar value of global debt surged by some $1.3 trillion quarter-on-quarter.

Emerging markets

Debt in emerging markets grew to a record of more than $105 trillion - having more than doubled over the past decade, according to IIF data.

The largest contributors to the increase among emerging economies were China, India and Mexico. South Korea, Thailand, and Brazil posted the largest dollar value declines in overall debt among the sub-group, the data showed.

“Government budget deficits are still higher than pre- pandemic levels and are projected to contribute around $5.3 trillion to global debt accumulation this year,” the IIF said in a statement. “Rising trade friction and geopolitical tensions also present significant potential headwinds for debt markets.”

Jul-Jan debt rises 6pc as govt borrowing continues

Interest rates were expected to have started declining in the United States by now but sticky inflation has seen the Federal Reserve stand its ground.

This has meant higher borrowing costs across the globe and, for many emerging markets, weakened currencies that further exacerbate the cost of servicing debt and “could once again bring government debt strains to the fore”, the IIF said.

“Egypt and Pakistan are seen as the emerging economies where the interest expense on government debt will be highest through 2026, with Pakistan set to spend above 50% of revenue on interest and Egypt more than 60%,” it said.

Developed economies

Among developed economies, the United States and Japan saw debt rise the quickest, adding 17 percentage points and 4 percentage points respectively.

Developing nations: ICMA discusses role of IMF lending in economies

Japan is expected to continue to spend on average under 2% of government revenue in debt servicing through 2026, according to the IIF. In the US, the figure is expected to rise above 10% from the current 8% and brush against 12% in the same period.

Last month, the International Monetary Fund warned the US level of spending is “of particular concern” and “out of line with long-term fiscal sustainability.”

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KU May 07, 2024 10:22pm
Another feather in cap of shame, along with a corruption rank of 130 out of 180 countries and justice/human rights score of 130 out of 142 countries, what more will we lose? Very much actually.
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Tariq Qurashi May 08, 2024 09:36am
We have been enjoying life on borrowed money, and this is just not sustainable. Our elites have to realize that we have to stand on our own two feet, and start focusing on Agriculture and Exports.
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M.amin malik May 09, 2024 12:14pm
@Tariq Qurashi, elite have little concern as they do not have to pay anything. Gen public should think for any remedy
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