Global government debt rose rapidly as a share of GDP during the COVID-19 pandemic. After peaking in 2020, the ratio declined for two consecutive years before rising again in 2023. It reached 92.3% in 2024 and climbed further to 95.3% in the second half of 2026, indicating that global fiscal space has continued to narrow since the pandemic.
Global Debt Ratio Rises Further, with Advanced Economies Facing Heavy Pressure
Lee-Rong Wang, Economic Forecasting Consultant at the Chung-Hua Institution for Economic Research (CIER), noted that government debt as a share of GDP is substantially higher in advanced economies than in emerging market and developing economies. Currently, the ratio is approximately 108.2% for advanced economies and 77.2% for emerging market and developing economies. This nearly 30 percentage point gap highlights the ongoing challenges high-income countries face in reducing debt following large-scale fiscal expenditures during the pandemic.
Among individual countries, Japan’s government debt stands at approximately 204.4% of GDP, among the highest levels recorded by major economies. The ratio is about 138.4% in Italy, 125.8% in the United States, 118.4% in France, 103.6% in the United Kingdom, 110.7% in Canada, and 106.9% in China. These substantial debt burdens make coordination between monetary policy normalization and fiscal policy increasingly important.
Wang emphasized that a high level of government debt does not automatically signal an imminent fiscal crisis. For instance, Singapore’s government debt is equivalent to 171.9% of GDP, yet the country maintains sound credit conditions due to substantial public assets and fiscal resources. Therefore, assessing government debt risk requires consideration of not only the debt-to-GDP ratio but also government assets, debt structure, financing capacity, currency status, and the depth of financial markets.
Rising U.S. Interest Costs Raise Concerns over a Debt-Interest Cycle
Wang explained that another significant consequence of rising global government debt is that persistently high interest rates may gradually increase government interest expenses, thereby constraining fiscal policy. The United States is currently attracting particular market attention, with net interest outlays estimated at approximately US$1.05 trillion in the first 11 months of fiscal year 2026.
If government debt continues to increase while market interest rates remain high, the costs of new borrowing and refinancing existing debt will also rise. This dynamic could create a cycle of increasing debt, higher interest expenses, and further government borrowing. The U.S. Treasury has recently favored issuing shorter-term Treasury bills to reduce near-term financing costs. However, excessive reliance on short-term debt would increase the frequency of future repricing and make public finances more sensitive to changes in interest rates.
Dollar’s Reserve-Currency Status Still Provides a Buffer, but Global Fiscal Policy Must Become More Resilient
Wang noted that the United States differs from other highly indebted countries in several key respects. The average maturity of U.S. government debt is approximately 5.9 years, so the government does not need to refinance its entire outstanding debt stock immediately. Additionally, the dollar remains the world’s principal reserve currency, and the United States possesses one of the world’s largest financial markets and substantial government financing capacity. As a result, its near-term fiscal risks differ from those faced by economies that rely heavily on external debt.
Historical experience shows that in the early 1980s, high inflation, a stronger U.S. dollar, and rapidly rising interest rates placed severe pressure on countries with heavy external debt burdens. Although the structure of global debt differs today, governments must continue to manage their finances prudently in an environment characterized by high debt and changing interest rates.
Wang suggested that mounting fiscal pressures in major economies could spill over into Taiwan through interest rates, exchange rates, capital flows, and financial market volatility. In addition to maintaining sound public finances, Taiwan should continue to monitor the debt structures and interest rate trends of major economies and strengthen financial market resilience to mitigate the economic impact of rising global fiscal risks.
Source: Lee-Rong Wang (October 7, 2026). Recent Developments and Challenges in Global Government Debt. Economic Daily News. https://money.udn.com/money/story/5629/9799080