The Institute of International Finance (IIF) has revealed that the global debt pile increased by US$8.3 trillion in the first quarter (Q1) of 2023.
In a report titled “Global Debt Monitor: Cracks in the Foundation” published in the preceding week, IFF stated that the global debt stock is now at a near-record of US$305 trillion.
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It went further to warn that the combination of high debt levels and rising interest rates has pushed up debt service costs, prompting concerns about the use of leverage in the financial system.
Central banks around the world have been hiking interest rates for over a year in a bid to rein in sky-high inflation.
“With financial conditions at their most restrictive levels since the 2008-09 financial crisis, a credit crunch would prompt higher default rates and result in more ‘zombie firms’ – already approaching an estimated 14% of US-listed firms,” the IIF said.
The debt stock is now US$45 trillion higher than the pre-pandemic (COVID-19) level and is even expected to continue growing rapidly.
The report showed that total debt in emerging markets hit a new record high of more than $100 trillion, around 250% of GDP, up from $75 trillion in 2019. China, Mexico, Brazil, India and Türkiye were the biggest upward contributors, according to the IIF.
Amongst the developed nations, Japan, the US, France and the UK posted the sharpest increases over the quarter, the IIF report said.
The Institute of International Finance (IIF) is the global association of the financial industry, with about 400 members from more than 60 countries.
The IIF provides its members with innovative research, unparalleled global advocacy, and access to leading industry events that leverage its influential network.
Its mission is to support the financial industry in the prudent management of risks; to develop sound industry practices; and to advocate for regulatory, financial and economic policies that are in the broad interests of its members and foster global financial stability and sustainable economic growth.
IIF members include commercial and investment banks, asset managers, insurance companies, professional services firms, exchanges, sovereign wealth funds, hedge funds, central banks and development banks.
Nnamdi Maduakor is a Writer, Investor and Entrepreneur
