The World Is $111 Trillion in Government Debt. Who Do We Owe?

In 2025, the world is essentially running on borrowed money. Global debt has climbed to a level that few economists imagined possible just a decade ago, with governments worldwide now carrying a combined $111 trillion in public debt, according to IMF data compiled by Visual Capitalist.

This staggering figure is $8 trillion more than last year and sits nearly equal to the peak seen during the height of the pandemic.

The numbers are immense, but the core story is simple: Debt has become the indispensable scaffolding of global economies, yet its weight is becoming increasingly difficult to support.

However, it is not the magnitude of this figure that has economic experts on edge; what is truly concerning is the speed at which it is climbing.

The Accelerating Debt Crisis

Governments are borrowing faster than they can grow. The IMF calculates that the world’s $111 trillion debt load is equivalent to about 94.7% of global GDP in 2025, and its October 2025 Fiscal Monitor warns that public debt has surged past pre-pandemic levels and is rising even faster. Projections indicate global public debt will exceed 100% of world GDP by 2029, a threshold not seen since the aftermath of World War II.

Reporting from The Guardian reinforces this outlook, noting the disturbing reality that debt is heading toward historic highs even before the next major global shock arrives.

The world is leaning on debt because it has become the easiest tool for addressing hard problems. It paid for lockdowns, stimulus checks, wars, election promises, and every emergency in between.

Governments borrow from pension funds, banks, foreign investors, and their own citizens. In many ways, one country’s debt is another’s savings. That dynamic is what keeps the system working, and also what makes it difficult to change.

But the problem is that it is not a long-term substitute for growth, and a rising debt crisis creates a clear problem: the more a government pays to service old debt, the less it has for future investment. Infrastructure projects are delayed; education systems weaken; healthcare budgets strain.

With less fiscal power left after servicing debt, governments are again forced to borrow to cater to social needs, infrastructure development, climate vulnerability, and geopolitical instability. It is essentially a vicious cycle.

The world is borrowing simply to stand still, but the resulting strain is beginning to show across every economic sector.

MORE INSIGHTS STORIES:

• Global ransomware activity rises 36% in Q3 2025, but average payments collapse
• How the escalating U.S.-China tariff war is forcing PCs, consoles and other gadgets out of the U.S. market
• The State of 6G: Where the World Stands

The Surge Catalysts

While the roots of debt accumulation run deep, the surge of the last five years has two specific catalysts that experts keep highlighting: surging interest expenses and softening global growth.

Rising interest rates after years of near-zero borrowing costs have fundamentally changed the financial math for governments. Many governments rolling over existing debt at higher rates have seen their interest payments balloon significantly. The IMF warns that several countries now see interest expenses swallowing up to 60% of their total government revenues, a level historically associated with severe fiscal stress and sometimes outright crisis.

At the same time, the global economic slowdown is simultaneously choking the revenue side of the ledger, driven by a perfect storm of factors. Major economies have decelerated as high rates hit investment, cost-of-living pressure curbs consumer spending, supply chains struggle to fully normalize, and tax revenue is slowing. Add climate shocks, food insecurity, energy volatility, and heightened social protection demands, and these forces are formidable. The IMF estimates that global growth will stay stuck around 3%, well below the historical average of 3.8%, for the next five years, making this the weakest medium-term outlook in decades.

Trade isn’t helping. According to the IMF and WTO, global trade volumes are expanding at barely 1%, their slowest pace outside a recession. Part of this is geopolitical: rising US-China tensions, technology controls, sanctions, and “friend-shoring” are fragmenting global markets. UNCTAD notes that trade fragmentation alone reduces growth in many developing countries and pushes governments to borrow more to cushion falling export income.

This global slowdown has created a cycle where weaker growth reduces revenue, revenue gaps drive more debt, higher debt raises interest burdens, and high interest burdens slow growth even further, keeping countries stuck in a fragile loop.

The Inevitability of Debt and Why it Exists

Experts across major institutions are clear on one thing: the world cannot avoid a high-debt environment anymore. Debt is not going away; it is now embedded in how economies function.

But every economic era has its own logic for borrowing, and today, the reasons are piling up, leaving governments with few alternatives.

In advanced economies, the primary forces are long-term demographic costs: rapidly aging populations necessitate heavy borrowing to finance entitlements like pensions and healthcare, often consuming well over half of projected future public expenditure growth.

Beyond demographics, global defense spending has accelerated faster than at any point since the early 1990s. Armed conflicts, geopolitical tensions, and sophisticated warfare compel governments to expand their defense budgets, often with borrowed money.

Climate-related costs add another unavoidable burden. Extreme weather events, rising seas, droughts, and wildfire damage force governments into constant cycles of emergency spending and climate adaptation. The UN warns these pressures are eroding national budgets far faster than expected. Humanitarian crises and public health emergencies like the COVID-19 pandemic are also big concerns. These unexpected shocks often require quick, massive spending that necessitates new sovereign borrowing.

Meanwhile, emerging economies and developing countries (EMDCs) face unique pressures. They borrow heavily for critical infrastructure development – roads, power grids, and networks – a necessary cost often financed externally. However, they are highly vulnerable to volatile commodity prices and exchange rate risk. Because EMDCs often borrow in U.S. dollars, any weakening of the local currency magnifies their debt burden instantly inflates dollar-denominated debt.

Unfortunately, another factor in several high-debt emerging markets is poor governance and corruption. This includes inefficient public spending, weak tax collection systems, and sometimes, large-scale corruption or capital flight.

Advanced and emerging economies borrow for different reasons, but both are locked into a future defined by high structural debt.

The Distribution and Structure of Global Debt

Even though debt is everywhere, it is far from evenly spread. The world’s obligations are concentrated heavily in a handful of countries, and this concentration shapes the financial stability of the entire global system.

According to IMF and Visual Capitalist data, the United States alone accounts for 34.5% of all global government debt, with China following at 16.8%, meaning just these two nations hold over half (51.3%) of the world's total.

The U.S. leads everyone with a staggering $38.3 trillion, equal to 125% of its GDP. Its debt market, anchored by Treasury securities, functions as the world’s primary safe asset, which gives Washington borrowing capacity that no other country possesses. Yet even this advantage has limits. Over the last five years, interest payments on that debt have nearly tripled, and by 2035, Washington is expected to spend $1.8 trillion a year on interest alone

China, meanwhile, holds $18.7 trillion in government debt. It grew by almost $2.2 trillion in 2025 alone, pushed up by state-led investment, stimulus spending, and falling land revenues as China’s property market struggles.

Then comes Japan, carrying $9.8 trillion in public debt, equal to a world-high 230 of GDP. Despite being deep in the red, Japan’s new government is rolling out more than $92 billion in fresh stimulus. Markets do not seem worried. Japanese stocks are hitting record highs.

Rounding out the major players are the UK and France, each sitting near $4 trillion. France has been especially unstable, cycling through five prime ministers in two years as lawmakers fight over spending cuts.

On the opposite end of the scale are countries whose debts barely register globally — not because they are fiscally prudent, but because their economies are small, their bond markets thin, or they simply cannot borrow much. Nations like Tuvalu, Nauru, Kiribati, Micronesia, Liechtenstein, and Samoa have total public debts measured in tens of millions.

So yes, the global debt system is top-heavy. A handful of economies anchor global capital markets, and their borrowing decisions influence interest rates, currency flows, and financial conditions far beyond their borders.

This is why the structure of debt matters as much as the size. Analysts emphasize two questions: Who holds a nation’s debt? And in what currency is it issued?

Advanced economies usually borrow in their own currencies and from their own citizens, banks, and pension systems. That domestic base gives them resilience. Japan is the perfect example: massive debt, but low default risk because the liabilities sit inside the country.

Emerging markets borrow less in absolute terms but face sharper risks. Many issue debt in dollars or euros, which means exchange-rate swings can inflate their debt burden overnight. A weakening local currency can suddenly make repayment far more expensive, even without new borrowing.

This simple difference carries profound implications for debt sustainability and impact on the economy.

Debt Ratio

While absolute debt figures offer scale, debt looks different depending on how you measure it. In absolute dollars, the U.S. is the outlier. But when you look at debt relative to GDP, a different story emerges.

In 2025, Japan remains the world’s most indebted major economy relative to size, at 230% of GDP. Sudan sits close behind at 222%, weighed down by war and economic collapse. Singapore lands at 176%, driven largely by strategic government borrowing tied to investment programs. Venezuela and Lebanon both exceed 160%, reflecting years of crisis, while the U.S. ranks 11th at 125%.

By contrast, the United States, despite its enormous $38 trillion debt, ranks only 11th in debt-to-GDP ratio at 125%, illustrating why absolute numbers alone do not tell the full story.

All told, 23 countries now owe more than their entire annual economic output. Two owe more than double. Overall, over 3.4 billion people now live in countries where governments spend more on interest payments than on health or education, according to UN and IMF analysis.

Yet high ratios are not always a sign of imminent danger. Japan (debt at 229.6% of GDP)is proof that borrowing heavily in your own currency from your own institutions can sustain high ratios for decades. Conversely, nations with far smaller debt loads, especially those borrowing externally, can be far more fragile. The true cost of debt is not the headline figure, but the opportunities lost when interest payments push out investment.

Looking ahead, the IMF expects debt ratios to continue climbing through the decade, especially in major economies like the U.S., China, and Japan.

For now, markets are calm. Investors still treat government debt as safe. But that calm depends on one belief: that governments can always pay the bill later.

The Toll on the Economy and on You

Experts have already established that the world cannot avoid a high-debt environment anymore, but if not properly managed, it can have direct consequences on everyday life.

The more a government spends servicing debt, the less it has for essential public investment. Roads decay, schools lag, hospitals strain, and long-term growth weakens.

This fiscal squeeze often leads to higher taxes, reduced public services, and slower wage growth. For several countries, the IMF's projections showing interest costs absorbing up to 60% of revenues illustrate the intense pressure on policymakers to choose between paying for the past and investing in the future.

Low-income nations are the most exposed, with more than half already in debt distress or at high risk of entering it. For many of them, rising interest costs mean pulling back on essential services, a situation that could reverse years of development progress, widen inequality, and undermine regional stability. Debt may be economic, but its consequences are deeply social and political.

Who the World Actually Owes

There is a persistent misconception that governments primarily owe money to foreign powers. In reality, most debt, especially in advanced economies, is largely an internal affair, owed domestically to institutions such as pension funds, banks, and central banks.

In fact, for large, stable economies, the primary creditors are domestic institutions. In the United States, for example, a significant portion of Treasury securities is held by U.S. citizens, retirement funds, and federal agencies. The U.S. government debt can therefore be seen as a promise made by the public to itself. Visual Capitalist’s breakdown shows similar patterns in Japan and parts of Europe.

However, this dynamic flips dramatically in the developing world. Many EMDCs rely heavily on external creditors, usually multilateral institutions such as the IMF and the World Bank, as well as official bilateral lenders like China, which has become a dominant creditor across Africa and Asia. Their obligations are frequently denominated in a foreign currency, most often the US dollar, thereby introducing significant currency risk. For them, currency risk and investor sentiment can determine the difference between stability and crisis.

Conclusion

The existence of debt is not where the danger lies, but in the speed at which it has grown and the projection.

The world is entering a slow-boiling debt era that cannot be wished away or solved with simple austerity. Experts from the IMF, UN, and leading economic institutes agree that countries need to invest in growth-driving sectors such as technology, skilled labor, and resilient infrastructure while also reforming tax systems and improving spending efficiency.

The next decade will show whether governments can pull back, or whether the world accepts debt as the permanent cost of keeping economies moving.

For now, the world is drowning in debt, and interest is also rising; even though the water is rising slowly, it is rising all the same. Without urgent, disciplined action, the burden will fall on citizens today and on future generations.