Rising Debt in OECD Countries
Interest payments on national debt have reached their highest share of GDP among rich nations since at least 2007, surpassing defense and housing expenditures, according to the OECD. In 2024, debt servicing costs for the 38 OECD countries rose to 3.3% of GDP, up from 2.4% in 2021. In the U.S., this figure stands at 4.7%, compared to 2.9% in the UK and 1% in Germany. The rapid increase is driven by higher borrowing costs, as bond investors brace for persistent inflation and increased government spending.
Total sovereign borrowing among high-income nations is projected to hit $17 trillion in 2025, up from $16 trillion in 2024 and $14 trillion in 2023. The OECD warns that rising yields and growing debt could restrict future borrowing, just as governments face urgent investment needs in infrastructure and climate initiatives. Additionally, a shift in bond ownership from central banks to private investors is increasing market volatility. Policymakers must now find ways to ensure borrowing fuels economic growth to stabilize debt levels.
Rising debt servicing costs are creating new financial and geopolitical challenges for OECD nations. Governments face tough choices between cutting spending, increasing taxes, or taking on more debt at higher costs. Market volatility is increasing as private investors replace central banks as major bondholders.
The key challenge is ensuring that future borrowing fuels economic growth rather than merely sustaining past deficits. Without clear fiscal strategies, some nations may struggle to manage their debt sustainably, risking long-term economic stagnation or financial crises.
Tuesday, March 25, 2025
