Global public debt heads past 100% of GDP, and the interest bill now drives it
Governments around the world owe more than at almost any time in modern history. The IMF now expects global public debt to exceed 100 percent of global GDP by 2030. The last time the world carried that much public debt was right after the Second World War.
High debt on its own is not new. What is new is the cost of carrying it. For more than a decade, governments could borrow cheaply and roll over their debts at low rates. That period is over. The main reason debt is getting harder to control today is not a wave of new spending. It is the interest bill.
Borrowing got expensive again
Long-term borrowing costs have climbed fast this year. Between February and September, the average 10-year government bond yield in the G7 rose by more than one percentage point, to its highest level in nearly two decades.
This did not start in 2026. The OECD's Global Debt Report, published in March, found that the average yield at which OECD governments issued fixed-rate bonds and bills was around 4 percent in 2025, a level last reached in 2007. Ten-year market yields have been about two percentage points above the yields on maturing bonds every year since 2023. In plain terms, every time a government replaces an old loan, the new one costs more.
The interest bill takes over
The IMF projects that the average interest rate governments pay on their debt will rise from 2.3 percent in 2021 to 3.7 percent by 2031. Applied to a much larger stock of debt, that difference is large.
The OECD shows what this means for richer countries. Interest spending across the OECD area was 3.3 percent of GDP in 2025, close to the ten-year peak of 3.4 percent. More telling is what drives the debt ratio. For several years, inflation quietly shrank the real value of debt and kept debt ratios in check. That help is fading. In 2026, the OECD projects that interest payments will add 2.5 percentage points to the OECD debt-to-GDP ratio, while inflation will take off only 2.4 points. For the first time since 2021, interest wins.
The United States shows the scale. The IMF projects US interest payments at 5.7 percent of GDP in 2031, up from about 2.8 percent before the pandemic. That is roughly what the country is projected to spend on Social Security, its largest single entitlement programme.
| Measure | Earlier | Latest or projected |
|---|---|---|
| Global public debt (% of global GDP) | – | Above 100 by 2030 |
| Average interest cost of government debt (%) | 2.3 (2021) | 3.7 (2031) |
| US interest payments (% of GDP) | about 2.8 (pre-pandemic) | 5.7 (2031) |
| Low-income countries: interest (% of revenue) | about 9 (2011-2019 average) | over 15 (today) |
| OECD area: interest spending (% of GDP) | 3.4 (ten-year peak) | 3.3 (2025) |
Source: IMF; OECD; author's calculations.
Shorter loans, faster pain
Governments have tried to dodge high long-term rates by borrowing for shorter periods. The OECD reports that Treasury bills, which mature within a year, now make up 15 percent of OECD government debt, and that in 2025 the issuance of 30-year bonds relative to 1-5 year bonds was the lowest since at least 2008.
That saves money today but adds risk tomorrow. Short debt has to be refinanced often, so any rise in central bank rates reaches the budget faster. The IMF makes the same point: shorter maturities mean higher policy rates pass through to government borrowing costs more quickly. When inflation is still above target and energy prices are high, central banks may have to keep rates up for longer, and the interest bill grows with them.
Poorer countries pay first
The squeeze is hardest where budgets are smallest. In low-income countries, interest payments now take more than 15 percent of total government revenue, against an average of around 9 percent between 2011 and 2019. Every extra dollar spent on interest is a dollar not spent on schools, clinics or roads.
The repayment calendar is also tight. The OECD finds that low-income countries must repay 52 percent of their outstanding bonds by 2028, and 29 percent by the end of 2026. For frontier borrowers such as Kenya, this is the real risk. The IMF notes that some frontier economies have regained access to international markets, but warns that this favourable window may not last: a shift in investor mood could sharply reduce room to borrow and widen spreads.
What it would take
The arithmetic is simple, even if the politics is not. When the interest rate on new debt is higher than the growth rate of the economy, a government needs a stronger primary balance, that is, revenue minus spending before interest, just to keep its debt ratio steady.
The world is moving the other way. The IMF puts the global primary deficit at about 3.3 percent of GDP in 2026. Stabilising the global debt ratio this year would require cutting it to around 2.6 percent, and because debt keeps rising, a similar adjustment would be needed again in the years ahead. By my calculation, the gap today is about 0.7 percent of world GDP.
None of this means a crisis is around the corner. Bond markets are still working well, and the OECD notes they have absorbed record supply smoothly. But the room to manoeuvre is shrinking. Money that goes to bondholders cannot go to defence, energy security or care for ageing populations. The IMF's conclusion is blunt: the longer countries wait, the more painful the adjustment becomes.
The debt story of the 2020s used to be about how much governments borrowed. Now it is about what that borrowing costs.
Sources
- International Monetary Fund, "Rising Sovereign Yields Raise the Fiscal Stakes" (IMF blog on the Fiscal Monitor), Era Dabla-Norris and Rodrigo Valdés, 14 October 2026. https://www.imf.org/en/blogs/articles/2026/10/13/rising-sovereign-yields-raise-the-fiscal-stakes
- OECD, Global Debt Report 2026, Chapter 1 "Sovereign borrowing outlook", 4 March 2026. https://www.oecd.org/en/publications/global-debt-report-2026_e9d80efd-en/full-report/sovereign-borrowing-outlook_4470147b.html