Global government and corporate debt exceeded $100 trillion in 2023, the OECD reported, warning that rising borrowing costs could limit future investments. Despite central banks cutting rates, debt remains expensive, and interest costs are expected to climb as low-rate bonds mature.
Governments face mounting expenses, from infrastructure to defense and aging populations. The OECD noted that between 2021 and 2024, interest costs rose to their highest level in two decades. Yet, many OECD and emerging market countries still have debt below market rates, though nearly half of government and around a third of corporate debt will mature by 2027, posing refinancing risks—especially for low-income nations.
Serdar Celik, OECD’s capital markets head, emphasized the need for debt to drive productivity. “If borrowing supports growth, there’s little concern. If not, economies will struggle,” he warned.
Since 2008, corporate borrowing has often funded refinancing and shareholder payouts rather than investment. Meanwhile, emerging markets reliant on foreign currency debt must strengthen local capital markets, as borrowing costs for dollar bonds have surged from 4% in 2020 to over 6% in 2024.
The OECD highlighted the financial strain of reaching net-zero emissions, which could push debt-to-GDP ratios up by 25 points in advanced economies and 41 points in China by 2050. If privately financed, emerging market energy debt would need to quadruple by 2035.
Foreign investors and households now hold a larger share of OECD government debt, but this trend may not last. Geopolitical tensions and trade uncertainties could rapidly shift investment flows, adding further economic risks.