The total value of outstanding government and corporate bonds worldwide exceeded $100 trillion last year, according to a report by the Organisation for Economic Co-operation and Development (OECD) released on Thursday.
As interest costs continue to rise, borrowers—both governments and corporations—face tough financial decisions, needing to prioritize investments that drive long-term growth.
The OECD, an intergovernmental economic organization with 38 member countries, monitors global economic trends, providing policy recommendations to foster economic stability and growth. Its latest global debt report highlights the increasing burden of interest payments on governments, which reached 3.3% of GDP in OECD member countries—higher than their collective defense spending.
Between 2021 and 2024, the share of interest costs relative to economic output rose from a 20-year low to a record high. While central banks have begun easing interest rates, borrowing costs remain significantly above pre-2022 levels.
As a result, existing low-rate debt is gradually being replaced with more expensive financing, pushing overall interest expenses even higher.
Governments worldwide are grappling with escalating spending commitments. Germany, for instance, recently approved a substantial investment plan to modernize infrastructure and support European defense initiatives. Meanwhile, major economies continue to face long-term financial pressures from demographic shifts and the transition to greener energy sources.
Since the 2008 financial crisis, many corporations have prioritized debt-financed refinancings and shareholder payouts over direct investments in business expansion, a trend the OECD finds concerning. For emerging markets that rely on foreign currency borrowing, the organization emphasizes the importance of developing local capital markets to reduce reliance on external funding.
The report highlights that the cost of borrowing through U.S. dollar-denominated bonds has risen sharply, from around 4% in 2020 to over 6% in 2024. Riskier, junk-rated economies now face borrowing costs exceeding 8%.
