For CFOs planning capital allocation for 2026 and beyond, the headline number is hard to ignore: Global debt has surged to nearly $346 trillion in the third quarter of 2025, or about 310% of world GDP, according to a report from the Institute of International Finance (IIF).
While bond markets remain open and corporate spreads are historically tight, government borrowing—especially in the US and Europe—is accelerating at a pace that could reset interest costs and reshape liquidity planning and balance-sheet strategy.
Mature markets largely account for the increase in debt. The US and China lead, but France, Germany, and the UK have also notched significant increases. Emerging markets have reached a new high of more than $115 trillion, with Brazil, Russia, South Korea, Poland, and Mexico following China in debt accumulation.
Government borrowing is driving the surge, says Emre Tiftik, director of Sustainability Research at the IIF, who co-authored the report. “With budget deficits still elevated—and the impact of large fiscal stimulus packages set to kick off in 2026 in Japan, the US, Germany, and China—sovereigns are likely to continue adding to their debt burdens and interest expenses,” he says.
The corporate sector presents another dimension of concern, with nonfinancial corporate debt close to the $100 trillion threshold, notably at firms investing in AI, clean energy, and defense. Tech companies, which traditionally financed growth through internal cash flows, are now tapping bond markets. The IIF report notes a shift toward more active use of bond markets, expanded bank borrowing, and more reliance on private debt.
Despite concerns about rising government debt levels, Marc Chandler, chief market strategist at Bannockburn Capital Markets, offers a more measured take: “There has been talk of a debt crisis for several years, but I am not persuaded it will hit in 2026.”
Investment-grade corporate borrowing remains strong, he points out, suggesting that elevated government debt has not yet significantly crowded out private-sector access to capital. For corporate leaders navigating this environment, Jean-Baptiste Wautier, an investor and a co-founder of Wautier Family Office, who also serves on the board of Pershing Square Holdings, suggests creating liquidity “buffers” in case of macro shocks while also taking advantage of the current ability to raise capital at some of the tightest spreads in a long time.
“Slow down temporary buybacks and dividends but consider strategic M&A while capital markets are wide open,” he advises.
