Global debt reaches $365 trillion, IIF warns of rising borrowing costs

Global debt reached $365 trillion after increasing by more than $10 trillion in the first half of 2026, according to Institute of International Finance research reported by CNBC and Forbes. For investors, the concern is that higher government borrowing costs can claim a larger share of public budgets and leave less room for other spending or for responding to economic shocks.

The increase was driven mainly by governments and nonfinancial companies, both of which reached new debt records, Forbes reported, citing the IIF. Forbes also reported that emerging markets accounted for the largest share of the increase, while the U.S., China and the eurozone together made up roughly three-quarters of net global debt growth.

Why do higher bond yields make global debt harder to manage?

A government bond yield is the return investors demand to lend to a government. When yields rise, governments generally face higher costs when they issue new debt or replace maturing bonds. That raises interest expense over time, particularly for countries that continue to run budget deficits, meaning their annual spending exceeds revenue.

The IIF warned that this can become a political and fiscal feedback loop. Elections can encourage short-term policy responses while longer-term choices on spending and revenue remain unresolved, according to CNBC's account of the research. As benchmark interest rates rise, interest bills are set to increase, the IIF said, alongside continuing pressure from health-care and public-pension costs.

That assessment is a warning about risk rather than a forecast that a debt crisis will occur. The size of the burden depends on future borrowing costs, economic growth, budget decisions and how much debt needs to be refinanced.

Which countries did the IIF highlight?

The IIF singled out the U.S., Japan, France and the U.K. for persistently large deficits and rising interest costs, CNBC reported. It said those were challenges historically associated with emerging-market governments experiencing debt distress.

CNBC also reported that medium- and long-term government bond yields in all four countries had risen to their highest levels in more than a decade. Forbes, also citing IIF data, said average G7 government borrowing costs were at their highest since mid-2008 and that annual interest expenses were nearly 85% higher.

The IIF estimated that advanced economies paid more than $3.3 trillion in interest on internationally traded government bonds last year, CNBC reported. Forbes gave a different figure, more than $3.5 trillion over the past year, so the precise total and time period cannot be reconciled from the available reports.

What policy responses are being urged?

The Organisation for Economic Co-operation and Development said governments should contain and reallocate spending, improve public-sector efficiency and strengthen revenue, according to CNBC. The group said reforms were needed to make debt more sustainable over the longer term and preserve governments' ability to respond to future shocks.

IMF Managing Director Kristalina Georgieva separately called for lower debt levels, fiscal consolidation and central-bank action to maintain price stability, CNBC reported. Fiscal consolidation refers to measures intended to narrow government budget deficits, including spending restraint, higher revenue or both.

This story draws on original reporting from CNBC.