World public debt is heading for a level last seen after the Second World War

What a Market Forces analysis finds on sovereign debt and markets over the next five years

Six findings from a Market Forces analysis of the global debt build-up: public debt on course for 100 percent of world GDP by 2029, rising interest bills as the fiscal cushion disappears, private, often leveraged investors replacing central banks as the marginal buyers of government bonds, two shocks the IMF has put numbers on, developing countries outside China paying more interest on external public debt than they received in net new lending from 2022 to 2024, and banks in emerging markets tied closer to their governments. Summarised here from the full report, with the source behind each finding.

By Dexil Codex12 October 20265 min read

This is a summary. The full report is open to read in Dexil.

6 findings, every claim traced to its source

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A tall stack of pale grey paper on a dark blue plinth in an empty white gallery. A thin orange line is painted across the wall behind it, level with the top of the stack. — Global public debt is approaching 100 percent of world GDP, a level last reached after the Second World War. On current policies the IMF projects it will reach it by 2029.

Governments borrowed heavily through the pandemic, and the IMF found no material improvement in global debt dynamics in 2025. The question now is less how much they owe than what it costs to carry, and who is still willing to lend.

A Dexil user asked our Market Forces module how sovereign debt will affect markets over the next five years. The answer it assembled leans on the IMF, UN Trade and Development and the Paris Club, and it is sobering. Debt is rising, the cost of carrying it is rising too, and the buyers of government bonds are changing.

Everything below comes from that one analysis, and every finding carries the sources it was drawn from.

What the analysis found

Economic

Public debt is on course for 100 percent of world GDP by 2029

The IMF's April 2026 Fiscal Monitor puts global government debt at nearly 94 percent of GDP in 2025. On current policies it reaches 100 percent by 2029, a level previously reached only after the Second World War. The IMF also estimates a bad-case path: debt-at-risk three years ahead stands near 117 percent of GDP, about 20 percentage points above the central projection. UN Trade and Development counts global public debt at 111 trillion US dollars in 2025.

Economic

The cushion that kept debt stable has gone

The IMF measures a fiscal gap: the distance between the primary balances governments are expected to run (budgets before interest) and the balances that would hold debt steady against GDP. A decade ago there was a cushion of more than 1 percent of GDP. Today it is near zero. Interest payments rose from 2 percent to nearly 3 percent of world GDP in four years, as maturing debt is refinanced at higher rates. The two largest borrowers run large deficits. The US runs a deficit of 7 to 8 percent of GDP near full capacity, with debt projected at 142 percent of GDP by 2031. China's deficit is nearly 8 percent, with debt heading toward 127 percent of GDP by 2031.

Economic

Private, often leveraged investors are replacing central banks as the marginal buyers of government bonds

As central banks shrink their balance sheets, private and often leveraged investors have become the marginal buyers of government bonds, most visibly in advanced economies. The IMF singles out hedge funds, whose trades can unwind quickly when volatility spikes. More US Treasury supply is also eroding the safety premium Treasuries have carried, which lifts borrowing costs everywhere. When US yields rise because of that extra supply, the rise passes almost one for one into other bond markets. The countries hit hardest are those that rely on foreign finance.

Political

Two shocks the IMF has put a number on: a long war and an AI correction

The war in the Middle East is already straining public finances through energy supplies and tighter financial conditions. If the conflict is prolonged, the IMF estimates global debt-at-risk rises by a further 4 percentage points of GDP. Separately, a correction in AI-related asset prices, with US stocks falling 20 percent, could add 2.4 percentage points. Both are IMF scenarios, not forecasts.

Economic

Developing countries have paid more interest on external public debt than they received in new lending

UN Trade and Development puts developing countries' government interest payments at almost 1 trillion US dollars in 2025, net of interest received, and growing much faster than government revenues. Since 2022, interest on their external public debt has exceeded net new lending, meaning new loans minus repayments of principal. The comparison leaves out China, and the data run to 2024. Aid donors are redirecting money to problems closer to home, and private lenders have become more cautious. The Paris Club Secretariat adds that median debt in low-income countries rose from 34 percent of GDP in 2010 to 55 percent in 2023-2024. In countries eligible for the World Bank's concessional lending, debt service averaged 16.1 percent of export earnings in 2023. The Secretariat also qualifies the picture: in 2025 these strains did not amount to a systemic debt crisis in the short term, though some countries need case-by-case support.

Economic

In emerging markets, banks and their governments are more exposed to each other

An IMF working paper published in 2026 traces how tighter global finance can push governments in emerging and developing economies to borrow from their own banks. Banks that expect a bailout have a reason to hold government debt rather than build capital. If investors then fear a default, those banks look fragile too. It finds no broad evidence that governments force banks to hold their debt. Where state-owned banks are large, though, higher government refinancing needs push up banks' holdings. The paper cites World Bank work: where banks hold a lot of risky government debt, a fall in its value could trigger a banking crisis.

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Everything above is a summary. The full report carries much more detail and insight: every finding, the evidence under it, and the sources behind each one. It was produced on the same platform our customers use, and the free tier will get you through your own first one.

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How this was produced

Question submitted: “Global debt crisis. How will global sovereign debt levels affect markets in the next 5 years?”
Analysis ID: Debt-crisis_MFv4_2026-10-06_192946
Executed: 6 October 2026

Module overview

A Dexil user ran the Market Forces module on the question above. It searches for sources, extracts the distinct forces acting on the topic, groups them into themes, and traces first, second and third-order effects.

We chose six of those forces and checked each figure against the source document it came from. The report goes on to set out scenarios for companies and lenders, which are not covered here.

This analysis was not commissioned by us. It is published with the permission of the user who ran it. Every finding links to the sources the analysis cited for it. It is still AI-generated analysis: a starting point for your own judgement, not a substitute for it.

See our AI disclaimer for the limits that apply to all Dexil output.

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Run this on your own market

How this was produced

Question submitted: “Global debt crisis. How will global sovereign debt levels affect markets in the next 5 years?”
Analysis ID: Debt-crisis_MFv4_2026-10-06_192946
Executed: 6 October 2026

Module overview

We chose six of those forces and checked each figure against the source document it came from. The report goes on to set out scenarios for companies and lenders, which are not covered here.

See our AI disclaimer for the limits that apply to all Dexil output.