Intermediate Business Reading

Nations Struggle Under Mountain of Debt

Global government debt has hit an eye-watering $71 trillion. Never before have so many countries owed so much.

"This is unprecedented territory," declares IMF Chief Economist Patricia Morton. Her latest analysis shows debt-to-GDP ratios breaking records across both developed and emerging economies. Japan tops the list at 264% of GDP, while Italy's debt burden has surged past 140%.

The pandemic changed everything. Emergency spending drove borrowing to astronomical levels - and now the bills are coming due. Rising interest rates mean governments are spending more than ever just servicing their debts. Last year alone, the UK government spent $68 billion on interest payments - enough to build 200 hospitals.

But some economists see hope. "We're not in a 1980s-style debt crisis," argues Dr. Wei Chen from the World Bank. "Most major economies can still borrow at manageable rates. It's about smart management now, not panic."

Emerging markets face tougher challenges. Sri Lanka's recent default sent shockwaves through developing nations. With the US dollar strengthening, countries that borrowed heavily in foreign currencies are feeling intense pressure. Brazil's finance minister Marco Santos calls it "a perfect storm of rising rates and currency pressure."

China presents a unique puzzle. While official government debt appears moderate at 77% of GDP, hidden local government borrowing could push the real figure far higher. "Nobody knows the true scale of Chinese debt," admits former US Treasury adviser James Morton. "That's what keeps financial markets nervous."

Greece, meanwhile, has emerged as an unlikely success story. After its near-collapse in 2012, strict reforms and debt restructuring have steadied the ship. "We've learned the hard way that debt sustainability matters," says Greek Finance Minister Andreas Papadopoulos. Yet even Greece's debt still hovers at 160% of GDP.

Will this mountain of global debt trigger another financial crisis? The OECD urges calm but caution. "Today's debt levels are sustainable if growth continues," their latest report states. "But countries need clear plans to reduce borrowing over time." With geopolitical tensions rising and climate change demanding massive investment, that balance won't be easy to strike.