Imagine waking up tomorrow and discovering that every single person on Earth owes roughly $13,800 to someone else – not because you personally borrowed it, but because your government did. That’s the reality we’re living in right now. Global public debt has quietly climbed past $111 trillion, and honestly, the number is so large it almost stops meaning anything… until you remember that someone, somewhere, has to pay it back.
I’ve been watching these figures for years, and every time the IMF updates its World Economic Outlook I feel the same mix of fascination and unease. The debt party that started after 2008 never really ended – it just changed venues. What started as emergency stimulus morphed into “new normal” spending, and now we’re at a point where interest payments alone are beginning to crowd out everything else governments want to do.
The New Geography of Debt in 2025
The distribution of who owes what has shifted dramatically over the last decade. A handful of nations now shoulder the overwhelming majority of global public borrowing, and the gaps between them are widening fast.
The United States: Still Wearing the Debt Crown
America remains the undisputed heavyweight champion of government borrowing. At $38.3 trillion, the U.S. federal debt now accounts for more than a third of everything the world’s governments owe combined. That works out to roughly 125% of annual economic output – a level that would have been considered unthinkable two decades ago.
What strikes me hardest isn’t the headline number anymore; it’s the speed at which interest costs are exploding. Net interest on the national debt has nearly tripled in five years. By 2035, the U.S. is on track to spend close to $1.8 trillion per year just to service what it already owes. That’s more than the entire defense budget, more than Social Security in many years, more than most countries’ entire economies.
When your debt service bill becomes one of the largest items in the federal budget, you’re no longer fully in control of your fiscal destiny.
China’s Rapid Climb Up the Debt League Table
Second place belongs to China, with just under $18.7 trillion in central and local government debt. That’s an astonishing increase of roughly $2.2 trillion inily in the last twelve months alone. The property sector meltdown and falling land-sale revenue forced local governments to lean harder than ever on bond issuance and special financing vehicles.
Here’s the part that keeps analysts up at night: much of this borrowing happens off-balance-sheet through local government financing vehicles (LGFVs). The official debt-to-GDP ratio of 96% feels almost comforting when you realize the hidden stuff could push the real figure significantly higher.
Japan: Where 230% Debt-to-GDP Somehow Still Works (For Now)
Japan has been the poster child for extreme debt levels for so long that people almost stopped noticing. At 229.6% of GDP, its public debt ratio is the highest in the developed world by a colossal margin. Yet Japanese government bonds still trade with negative real yields, and the currency hasn’t collapsed.
The secret sauce? Almost all of that debt is owned domestically – by Japanese banks, insurance companies, pension funds, and the Bank of Japan itself. It’s an arrangement that feels a bit like a family passing the same IOU around the dinner table forever. It works… until the day it doesn’t.
Europe’s Chronic Borrowers
France and Italy continue to hover in uncomfortable territory. France is pushing 116% debt-to-GDP while trying to pass budgets that actually reduce deficits – a political third rail that has already toppled multiple prime ministers. Italy sits at 136%, quietly benefiting from the fact that markets seem more worried about France at the moment.
The United Kingdom, meanwhile, has seen its debt burden balloon past £4 trillion. The Truss mini-budget fiasco still casts a long shadow; investors now demand higher yields on gilts than they do on Italian debt in some maturities. That’s not a sentence anyone expected to write five years ago.
The Emerging Market Surprise
Look lower down the list and something interesting happens. Singapore appears with debt at 175% of GDP – higher than Japan on paper. But virtually all of it is issued to fund its sovereign wealth funds and national pension system. In accounting terms it’s debt; in economic reality it’s closer to pre-funded future liabilities. Context changes everything.
Then there’s the other extreme: countries like Russia managing to keep official debt below 25% of GDP even after years of war and sanctions. Low reported debt doesn’t always mean fiscal virtue – sometimes it just means you’ve already defaulted on everything you can’t pay or you’re funding spending through inflation instead of bonds.
| Rank | Country | Debt 2025 ($bn) | % of Global Total | Debt-to-GDP |
| 1 | United States | 38,270 | 34.5% | 125.0% |
| 2 | China | 18,681 | 16.8% | 96.3% |
| 3 | Japan | 9,827 | 8.9% | 229.6% |
| 4 | United Kingdom | 4,093 | 3.7% | 103.4% |
| 5 | France | 3,916 | 3.5% | 116.5% |
| 6 | Italy | 3,480 | 3.1% | 136.8% |
| 7 | India | 3,358 | 3.0% | 81.4% |
| 8 | Germany | 3,229 | 2.9% | 64.4% |
Why Debt Keeps Rising Even When Economies Recover
Here’s the part most people miss: modern governments rarely pay debt down anymore. They just roll it over and add more when needed. The pandemic broke whatever remained of fiscal orthodoxy. Suddenly trillion-dollar deficits became normal, and politicians discovered that voters actually like receiving checks more than they dislike abstract debt figures.
- Ageing populations mean higher pension and healthcare costs
- Climate transition requires massive public investment
- Geopolitical tension demands higher defense budgets
- Interest rates rose faster than anyone expected, making existing debt more expensive to service
- Political cycles reward spending today and punish austerity tomorrow
Add all that together and you get a world where debt-to-GDP ratios almost never fall anymore. Even countries running primary surpluses (collecting more tax than they spend excluding interest) watch their overall debt ratios climb because interest costs outpace everything else.
The Interest Payment Time Bomb
This is where things get scary quickly. Global interest payments on public debt are projected to hit $10 trillion annually within a few years. That’s money that can’t be spent on schools, hospitals, infrastructure, or tax cuts. It just disappears into the pockets of bondholders.
For developing countries, the situation is already catastrophic in places. Countries like Egypt, Pakistan, and Sri Lanka have spent more on debt service than on health and education combined in recent years. When a government has to choose between paying foreign bondholders and importing medicine, you’re in crisis territory regardless of what the official debt-to-GDP ratio says.
Can Anything Actually Stop This Trajectory?
Growth would help, but most developed economies are maturing into lower trend growth rates. Inflation helps reduce real debt burdens but destroys purchasing power and punishes savers. Default is politically impossible for reserve currency nations and economically catastrophic for everyone else.
In my view, we’re moving toward a world of financial repression: keep interest rates lower than inflation for as long as possible, gradually erode the real value of debt, and hope nobody notices too much. Japan has been doing this for thirty years. Europe tried it after the eurozone crisis. The U.S. may have no realistic alternative soon.
The $111 trillion question – sorry, I had to – is whether markets will continue to finance these deficits indefinitely at reasonable rates. History says eventually they won’t. The only unknown is what the trigger looks like and who feels the pain first.
One thing feels certain: the era of consequence-free borrowing is drawing to a close. The world has partied on debt for fifteen years. At some point, the bill always arrives.
