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- Overtaking block: the national debt of developing countries is growing twice as fast as the rich
Overtaking block: the national debt of developing countries is growing twice as fast as the rich
The growth of the national debt of developing countries has significantly outstripped the same indicator for developed countries. From 2010 to 2024, their borrowings increased 3.7 times (by $23 trillion), while those of the "rich" increased 1.7 times (almost $28 trillion), CIMAC experts estimated (Izvestia analyzed the materials). Nevertheless, two thirds of the world's debt is owed by developed countries, in particular the United States, China and Japan. The increase in global borrowing is likely to become one of the main problems of the global economy, analysts say. The growing debt burden increases the risks of financial crises and market volatility. What is causing the global public debt to increase, in which countries there is a high risk of default and what is happening in Russia - in the Izvestia article.
Why is the global public debt growing?
The total global public debt has already reached a record amount of about $102 trillion (92% of global GDP). This is becoming a risk to the stability of the economy — borrowing is likely to be one of the global economic problems of the next decades, experts from the Center for Macroeconomic Analysis and Short-term Forecasting (CIACP) said in their analytical review "Trends in the development of the world's largest economies: the United States, the euro area and China" (Izvestia studied it).
The article notes that the national debt of developing countries has been increasing at a faster pace in recent years. Over the past 15 years (in 2010-2024), the borrowings of "rich" states increased 1.7 times (by almost $28 trillion), while those of developing countries increased 3.7 times (by $23 trillion). By the end of 2024, developed countries accounted for two-thirds of the total national debt — $70 trillion, while developing countries accounted for about $32 trillion.
At the same time, developing countries have a high sensitivity to the amount of debt. This is due to several reasons: the lack of own income (in particular, tax), the difference in the phases of economic development and the nature of budget priorities, says Svetlana Frumina, Acting Head of the Department of Global Financial Markets and Fintech at Plekhanov Russian University of Economics.
— In "rich" countries, the infrastructure base has been formed, where borrowing is more often directed towards maintaining the existing standard of living. At the same time, in developing countries, this is done to build productive and institutional capacities. Therefore, the accelerated growth of debt is largely dictated by the tasks of catching up with development," the expert explained.
However, there have been significant amounts of government borrowing before, for example, in the United States after World War II, experts from the CMACP noted. Now the situation has changed — the increase is also related to the rates and budget deficits of the countries.
— In addition, the government debt rates of developing countries are obviously higher, so the maintenance costs are higher. At the same time, the stability of the economy and the generation of budget revenues are usually lower, which creates the risk of a closed cycle for these countries: "rising debt — rising debt servicing costs — rising debt," Roman Volkov, a leading expert at the CMACP, explained to Izvestia.
In previous years, borrowing was mainly increased by developed countries in the context of either the active growth of their own economies or the expansion of the economies of developing countries (which invested in the public debt of the "rich"), Roman Volkov continued. At the same time, a number of significant factors — an increase in trade barriers and sanctions, and geopolitical tensions — indicate that such a slowdown in the global economy will persist in the medium term, he added.
What is the danger of increasing government borrowing
The growth of government debt increases the tax burden on businesses, and also leads to capital outflow from countries with high levels of borrowing, said Alexander Abramov, head of the Laboratory for the Analysis of Institutions and financial markets at the Presidential Academy. As the experts of the CMACP note in their material, global public debt has a high concentration — about a third of its volume falls on the United States, together with China they already form half, and with Japan — already 60%.
That is, in absolute terms, the United States is now in the lead — they have $37 trillion in government debt, China — more than $14 trillion, Japan — $ 10 trillion, Igor Rastorguev, a leading analyst at AMarkets, drew attention. In addition, Sudan (above 250% of GDP), Japan (236% of GDP), as well as Greece (over 140% of GDP) and Italy (135% of GDP) are among the largest values in terms of government borrowing, compared with the size of the country's economy, said Vladimir Chernov, analyst at Freedom Finance Global.
At the same time, small economies such as Macau (near zero) and Brunei (2.2% of GDP) have minimal government debt due to oil and gas revenues, Igor Rastorguev noted.
Default risks exist mainly in developing countries, where the share of external debt is high, short repayment periods and a narrow cushion of reserves, Vladimir Chernov noted. By comparison, domestic debt is usually manageable due to the local investor base and monetary policy instruments, but at high rates it can also become more expensive quickly and put pressure on banks, he added.
For example, the S&P rating agency identifies a "risk zone": Pakistan, Sri Lanka, Bangladesh, Venezuela, Zambia, Ghana and Argentina, where the probability of default in 2025-2027 is estimated at 75%. The latter has already experienced nine defaults in its history, the most recent in 2020, Igor Rastorguev drew attention.
In the medium term, the growth of public debt in the world's largest economies will lead to an increase in the tax burden and a slowdown in economic growth, believes Alexander Abramov from the Presidential Academy.
What are the risks for Russia from the growth of global public debt
For Russians, the main risks are associated with the "import" of instability through global economic channels, Igor Rastorguev from AMarkets is sure. In other words, the critical level of public debt in the largest economies poses the threat of a "devaluation domino" — a simultaneous weakening of the world's leading currencies. This, in turn, will affect the ruble exchange rate and purchasing power.
If developed countries face debt crises, global economic growth will slow down, which will negatively affect demand for Russian exports, from energy to metals, the expert believes. Currently, the IMF forecasts a global GDP growth rate of 3-3.1% in 2025-2026. The UN and the World Bank have lower expectations for these two years — 2.9% and 3%, respectively.
— In addition, high global debt leads to higher interest rates in the world, which increases the cost of borrowing for all market participants, including Russian companies. As a result, under the conditions of sanctions, additional difficulties arise with access to financing," Igor Rastorguev explained.
When asked by Izvestia about the risks of global public debt growth for Russia, the Ministry of Finance advised contacting the Central Bank and the Ministry of Energy. The editors also sent inquiries. In our country, the volume of borrowings remains low — less than 15% of GDP, Vladimir Chernov drew attention. This provides a margin of safety, but the cost of servicing it is increasing due to the high yields of federal loan bonds (OFZ). Dependence on internal sources of financing reduces external risks, but increases sensitivity to demand from local investors and to the key interest rate, which remains high at 17% per annum.
Thus, about 82% of Russia's debt is domestic, denominated in rubles, and it is not subject to currency risks, Igor Rastorguev noted. At the same time, a balanced budget policy and control over the pace of borrowing are important to maintain the situation.
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