Global public debt surged to $102 trillion in 2024, an increase of $5 trillion from 2023, largely fueled by a series of cascading crises and uneven global economic performance. This growing debt burden disproportionately impacts developing countries, many of which are spending more on interest payments than on essential public services like health or education. At least one in three developing countries, home to 3.4 billion people, face this challenge, exacerbating a $4.3 trillion annual sustainable development financing gap. The COVID-19 pandemic, rising interest rates in 2022-2023, a global growth slowdown, geopolitical tensions, and declining Official Development Assistance have further intensified these pressures, pushing the OECD area debt-to-GDP ratio higher and leading to record sovereign bond issuance and outstanding volumes.
The increasing reliance on private creditors, which tend to be more volatile, complicates debt restructuring efforts. In 2023, developing countries paid $48 billion more to private external creditors than they received in new disbursements, resulting in an overall net debt outflow of $25 billion. The complexity of a diverse creditor base, with diverging interests and legal frameworks, makes debt restructuring more difficult and time-consuming. Restructurings since 2020 are taking longer to complete than in previous decades, highlighting the need for improved debt crisis resolution mechanisms.
In 2025, gross sovereign borrowing in OECD countries hit a record $17 trillion, projected to rise to $18 trillion in 2026. Refinancing requirements reached approximately $13.5 trillion in 2025, accounting for nearly 80% of gross borrowing. Total outstanding sovereign bond debt in OECD countries reached an all-time high of $61 trillion in 2025, up from $55 trillion in 2024, and is projected to climb to 85% of GDP in 2026. Non-OECD emerging market and developing economies also saw record sovereign bond debt of $12.1 trillion in 2025, or about 30% of GDP.
The global bond sell-off in 2026 signaled investor concerns about governments' ability to manage their debt, with long-term borrowing costs for countries like the U.S., France, and Britain nearing or exceeding 5%. With the U.S. federal debt surpassing $40 trillion, or 125% of its GDP, and annual budget deficits around 6% of GDP, the bond market is pressing governments to adjust their budget policies and reform unsustainable spending programs. The current international financial architecture is seen as ill-equipped to handle these challenges, prompting calls for reforms including more inclusive governance, enhanced liquidity in crises, and an effective debt workout mechanism.
Key areas for reform include making the financial system more inclusive for developing countries, enhancing liquidity during crises through measures like expanded Special Drawing Rights and temporary suspension of IMF surcharges, and creating a more effective debt workout mechanism. This mechanism would address deficiencies in current frameworks, such as limited country eligibility, creditor coordination challenges, and insufficient engagement from private creditors. These reforms aim to move towards a system that avoids a "too little, too late" approach to debt sustainability and provides more and better concessional finance.
