Global government debt climbed by $10 trillion in the first half of 2026 to top $365 trillion, the Institute of International Finance reported, as bond yields in the U.S., Japan, France and the U.K. hit their highest levels in more than a decade. The IIF says advanced economies are trapped in a "vicious cycle" of deficits and rising interest costs, while the IMF's Kristalina Georgieva calls fiscal consolidation a political necessity that governments keep avoiding.
Governments are running out of room to dodge the bill for their own borrowing. Global debt rose by $10 trillion in the first half of the year to top $365 trillion, according to research the Institute of International Finance published Wednesday. Debt has become a political issue, the IIF said, creating a cycle between elections and short-term quick fixes that leaves a long-term vulnerability unaddressed as the payoff from more borrowing keeps shrinking.
Advanced economies face emerging-market pressures
Yields on medium- and long-term government bonds have hit their highest levels in more than a decade in the U.S., Japan, France and the U.K., reflecting investor discomfort with rising interest rates, persistent energy costs, tepid growth and heavy fiscal spending. The IIF singled out these four economies as facing deficits and interest burdens typically associated with debt-distressed emerging markets.
Advanced economies paid over $3.3 trillion in interest on internationally traded government bonds last year — more than the world spent individually on AI ($2.6 trillion), defense ($3.1 trillion) or clean energy ($2.3 trillion). Healthcare and pension spending remain largely unaddressed even as benchmark rates keep pushing interest expense higher, the IIF added.
Georgieva presses for fiscal consolidation
IMF chief Kristalina Georgieva told the BBC this week that shocks to the global economy were pushing debt higher, and warned governments have not matched the urgency with action. According to CNBC: "impossible to stress strongly enough how critical it is" to bring down debt and prioritize fiscal consolidation, she said, calling the necessary steps politically tough but unavoidable.
The OECD's economic outlook published Wednesday echoed the warning, saying rising bond yields show governments need to contain and reallocate spending, improve public-sector efficiency and strengthen revenues. Reforms are needed, the Paris-based organization said, to keep debt sustainable and leave room to react to future shocks.
Interest costs at advanced economies already exceed what the world spends on AI, defense or clean energy.
Source: CNBC
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