Debt grows, though more slowly than in 2025
Borrowing by governments, households and businesses added $10 trillion to global debt in the first half of 2026, according to the Institute of International Finance (IIF). The total now amounts to roughly $44,000 per person worldwide.
The IIF's Global Debt Monitor, published September 23, showed that the increase was less than half the $21 trillion recorded in the first six months of 2025. It marked a sixth consecutive quarterly rise. At about 310% of global GDP, debt remained roughly 25 percentage points below its early-2021 peak.
Emerging markets accounted for most of the additional borrowing. Their debt increased by $6.5 trillion to more than $110 trillion, with China leading the rise. Excluding China, emerging-market and developing economies added about $1.7 trillion, bringing their total to a record $38 trillion.
Corporate borrowing also contributed. U.S. nonfinancial companies owed $24 trillion amid a surge in AI-related borrowing, the IIF reported. Private credit loans represented more than 5% of their outstanding debt.
Interest competes with other spending
Over the past year, advanced economies spent more than $3.3 trillion servicing their government bonds. That exceeded worldwide spending on each of three major priorities: defense at $3.1 trillion, artificial intelligence at $2.6 trillion and clean energy at $2.3 trillion.
The IIF put average government borrowing costs in the G7 at their highest level since mid-2008 and reported that annual interest expenses were nearly 85% higher.
Larger interest payments leave governments with less money for schools, hospitals and pensions. Covering those payments can require tax increases or spending cuts. More expensive government borrowing can also feed through to mortgage, auto loan and credit card rates.
Meanwhile, the IIF forecast about $25 trillion in 2026 spending on healthcare, energy security, AI/IT and defense, a grouping it calls the "HEAD supercycle." Those outlays would equal roughly one-fifth of global output, with a growing share financed through debt markets.
The institute warned that debt had become "more a political issue than a macro-financial one," describing a "vicious cycle" linking elections and short-term fixes. It identified the United States, France, the United Kingdom and Japan as countries with persistently large deficits and rising interest expenses, problems it said had long characterized debt-distressed emerging-market governments.
France's borrowing costs rise amid protests
France illustrates the pressure on public finances. Its benchmark 10-year government bond yield briefly passed 5% on October 21, 2026, for the first time since 2002, CNBC reported. The gap over Germany's 10-year Bund widened to nearly 160 basis points, according to Euronews.
France's roughly 5% borrowing rate compares with Germany's 3.41%. Investors now demand a higher return from France than from Italy or Greece, both heavily affected by the eurozone debt crisis. Among the euro-area countries and the UK in the comparison, only the UK, which does not use the euro, faces a higher rate.
The increase comes as hundreds of thousands of people across Europe protest expensive housing, low wages, rising living costs and underfunded schools. Demonstrations in France, Belgium, Italy and Portugal have sometimes involved clashes, looting and fires, although many have remained peaceful. France's Interior Ministry counted more than 550,000 demonstrators nationwide on Saturday.
Years of heavy borrowing have left many European governments carrying large debts just as financing becomes more costly. France has the world's fifth-largest government debt, at $4.2 trillion, equivalent to 118.5% of GDP. The IMF projects that ratio will reach 121.8% by 2030.
Budget cuts and a pending rating decision
France is under the EU's excessive deficit procedure. The bloc has recommended bringing its deficit closer to 3% of GDP, down from 5.1% at the end of 2025, according to CNBC.
Prime Minister Sébastien Lecornu is seeking €54 billion ($60.6 billion) in spending cuts for the 2027 budget. The government has said it could invoke Article 49.3 of the constitution to pass the budget through parliament without a vote.
A Moody's decision on France's sovereign credit rating is due Friday, October 23, 2026. Most economists expected a downgrade that would automatically increase the government's borrowing costs, Euronews reported.
