After reaching an all-time high of US$296 trillion in the June quarter, the level of global debt eased a little in the September quarter and is expected to finish the year at $295 trillion. But the respite may be short-lived, with massive funding required for big climate projects.
The Institute of International Finance released its latest global debt figures, putting global government debt in the September at US$86.3 trillion, an increase of 7.1 per cent compared with the same period last year.
Global non-financial corporate debt rose 5.7 per cent year-on-year to US$86.6 trillion and financial sector debt rose 2.6 per cent to US$67.8 trillion.
Global household debt had the biggest rise, increasing 33.5 per cent year-on-year to US$55.4 trillion. IIF estimates are based on figures from the International Monetary Fund, the Bank for International Settlements and national government data.
IIF said global debt rose US$32 trillion in 2020. It expects the increase to be US$4 trillion this year, with all of that increase in the first half of the year.
Economic recovery has helped push down the global debt-to-GDP ratio. IIF estimated that the ratio will fall from 359 per cent in 2020 to 346 per cent this year.
While the overall figures show the growth in global debt has reached its COVID peak, emerging markets debt is still rising. IIF said the increase is concentrated in China.
IIF said the respite from growing global debt levels might be short lived, with government and private sector spending on climate and environmental initiatives expected to rise sharply in the coming years.
“Governments devote a very small portion of their budgets to environmental protection currently. Many governments are expected to channel significantly more resources towards climate priorities, with major implications for government debt, interest rates and ‘greenflation’,” it said.
It has estimated that sustainable debt issuance (bonds and loans) will reach US$1.5 trillion this year, double 2020 issuance, and keep rising strongly in the years ahead.