Global debt has now topped $100 trillion, and governments and corporations are facing the highest interest costs seen in two decades. The Organisation for Economic Co-operation and Development (OECD), which brings together 38 member countries to develop policies that improve living standards, notes that its member governments are spending 3.3% of GDP on interest payments—more than they spend on defense.
Although central banks have begun to lower interest rates in some regions, borrowing remains expensive and almost half of all government debt must be refinanced by 2027. That refinancing schedule raises vulnerability, particularly for low-income countries: more than half of their debt is due within three years, increasing the risk of fiscal stress. Meanwhile, dollar-denominated borrowing costs have climbed from roughly 4% in 2020 to over 6% in 2024, adding pressure on borrowers who rely on foreign-currency funding.
The OECD warns that in this environment, governments and firms should focus new borrowing on productive investments—projects that boost long-term growth, such as infrastructure, clean energy, and human capital—rather than on financial engineering or shareholder payouts. Many countries are already facing rising demands on public spending, including infrastructure renewal, defense commitments, climate adaptation and mitigation, and support for aging populations. Prioritizing investments that strengthen future revenue and resilience will help mitigate the risks associated with high debt-servicing costs and large near-term refinancing needs.
In short, the combination of a record global debt load, elevated interest expenses, and a concentrated refinancing timeline underscores the need for prudent fiscal management. Policymakers are urged to weigh borrowing decisions carefully, ensuring that new debt supports sustainable growth and fiscal stability rather than short-term financial maneuvers.