Global debt rose to an all-time high of $307 trillion in the second quarter, by the end of June 2023. Quite notably, global debt has risen by about $100 trillion over the last decade. Further, global debt as a share of gross domestic product (GDP) has started to increase once again to hit 336% after dropping quite steeply for seven consecutive quarters.

Global debt refers to the borrowings of governments as well as private businesses and individuals. Governments borrow to meet various expenditures that they are unable to meet through tax and other revenues. Governments may also borrow to pay interest on the money that they have already borrowed to fund past expenditures. The private sector borrows predominantly to make investments.

The rise of global debt came to a halt during the pandemic as economic activity turned sluggish and lending slowed down. But global debt levels, it seems, have started to rise again in the last few quarters. Most (over 80%) of the rise in global debt in the first half of the year has come from advanced economies such as the U.S., the U.K., Japan and France. Among emerging market economies, China, India and Brazil have seen the most growth in debt. During the first half of 2023, total global debt rose by $10 trillion.

Rising global debt levels usually leads to concerns about the sustainability of such debt. This is particularly so in the case of government debt which is prone to rise rapidly due to reckless borrowing to fund populist programmes. And when central banks raise interest rates, servicing outstanding debt becomes a challenge for governments with a heavy debt burden.

The most recent example of the same was the 2008 global financial crisis. The crisis was immediately preceded by an economic boom fuelled by the U.S. Federal Reserve's easy credit policy.