High levels of debt are a worry the world must confront

The OECD's 'Global Debt Report' flags the global risks of a debt spike in rich-world economies

- RAHUL JACOB

Policy reports from multilateral institutions are often an antidote to insomnia. But not the Global Debt Report 2025 released by the OECD in March. It has characteristics that compare favorably with a cliff-hanging pulp thriller. Factoid-after-factoid of growing developed-world indebtedness leaves the reader almost numb with worry. OECD sovereign debt has climbed from $5 trillion before the global financial crisis (GFC) in 2007 to $15.7 trillion last year.

The culprit in part has been quantitative easing, when central banks increased money supply after the GFC. But the rise in debt at the government and corporate levels seems unyielding more than a decade-and-a-half later. This opening salvo from the report's summary sets things in context: "Sovereign bond issuance in OECD countries is projected to reach a record $17 trillion in 2025, up from $14 trillion in 2023. Emerging markets and developing economies borrowing from debt markets has also grown significantly, from around $1 trillion in 2007 to over $3 trillion in 2024."

Add to it the fact that central banks are reducing their exposure to government debt even as corporate debt in the OECD is rising and you have the makings of a debt funding impasse that could easily spiral into a crisis. Also, pension funds in the West have less aggregate exposure to government bonds. As Philip Coggan observes in a recent article for the Financial Times, this is because employees in the West increasingly use defined contribution plans to fund pensions in which the responsibility to make investment decisions is on them.