Global Debt Hits Record $324 Trillion Amid Weakening Dollar

Global debt reached an unprecedented $324 trillion (approximately KRW 45.25 quadrillion) by late March 2025, marking a historic surge, according to the Institute of International Finance (IIF). Within the first quarter of this year alone, global debt spiked by $7.5 trillion—over four times the average quarterly increase.

A primary factor driving this surge is the weakening U.S. dollar in foreign exchange markets. Debt denominated in non-U.S. currencies recalculated in dollar terms expanded the overall debt volume. Significant debt increases from China, France, and Germany were major contributors, while Canada, the United Arab Emirates (UAE), and Turkey managed to reduce their debt levels.

Despite this, the global debt-to-GDP ratio saw a slight dip, currently standing at just over 325%. However, emerging markets reached a record-high debt level of $106 trillion, with their aggregate debt-to-GDP ratio hitting an unprecedented 245%.

Soaring Emerging Market Debt: China's Growing Burden

Emerging markets continued to set records in total debt levels, with China alone adding over $2 trillion in debt in the first quarter, pushing its debt-to-GDP ratio to 93%. Analysts warn this could approach 100% by year-end.

Excluding China, other emerging markets like Brazil, India, and Poland also saw significant debt increases, though their average debt-to-GDP ratio remained below 180%, about 15 percentage points lower than previous peaks.

IIF Highlights Debt Servicing Challenges and Interest Rate Risks

The IIF emphasized the growing challenges of debt servicing and principal repayments. By the end of 2025, emerging markets must repay $7 trillion, while advanced economies face obligations around $19 trillion.

While a weaker U.S. dollar has somewhat eased repayment pressures for emerging markets, the IIF warned of rising market volatility. High tariff measures initiated under former U.S. President Donald Trump could push export-dependent economies to further expand fiscal spending.

Regarding U.S. Treasury debt, the IIF expressed concerns: “The vast scale of outstanding debt combined with the expanded fiscal deficit under the 'Trump tax cuts' has sharply increased funding demands, raising concerns about upward pressure on U.S. Treasury yields.” A significant surge in Treasury issuance could elevate long-term interest rates, substantially increasing government interest payment obligations, potentially escalating inflation risks in the U.S.

As market dynamics shift, both advanced and emerging economies face significant headwinds related to debt sustainability, exchange rate fluctuations, and rising interest rate risks. The IIF’s findings highlight the urgent need for coordinated global policy responses to address these challenges.