Unlock the publisher’s digest free
Roula Khalaf, editor -in -chief of the FT, selects her favorite stories in this weekly newsletter.
Payments of interest swallow most of the economic production of nations rich since at least 2007, exceeding their expenses in defense and housing, according to OECD figures.
The costs of debt services in percentage of GDP for the 38 OECD countries increased to 3.3% in 2024, a sharp increase of 2.4% in 2021, according to the group’s global debt report on Thursday. On the other hand, the World Bank estimates that the same group spent 2.4% of GDP on their soldiers in 2023.
Interest costs represented 4.7% of GDP in the United States, 2.9% in the United Kingdom and 1% in Germany.
Borrowing costs have increased in recent months when bond investors are preparing for persistent inflation in major economies and the increase in the issue, as many governments widen defense spending and other budget reminder policies.
The OECD warned that the double blow of the increase in yields and increasing debt was likely to “restrict the future borrowing capacity at a time when investment needs are higher than ever”. He highlighted a “difficult perspective” for the global debt markets.
Sovereign loans among the group of high income countries should reach a new record of 17 TN in 2025, against $ 16 TM in 2024 and 14 TN in 2023, according to the OECD report. This wave of debt issuance has fueled concerns concerning sustainability in countries like the United Kingdom, France and even the United States.
The burden of the important debt itself was “not negative,” said Carmine Di Noia, OECD director for financial and business affairs.
But a large part of the loan in the past 20 years had been spent to recover from the 2008 financial crisis and the COVVI-19 pandemic, he added, arguing that “now it is necessary to go from resumption to investment”, such as expenditure in infrastructure and climate projects.
“Borrowing must increase growth” so that governments can possibly “stabilize and actually realize the debt / GDP ratio,” said Noia.
But the image is complicated by higher bond yields, which makes the refinancing of the existing debt more expensive.
The report noted that nearly 45% of the Sovereign Debt of the OECD would have matured by 2027. “There was a lot of deliverance in favorable conditions,” said Di Noia, adding that these conditions have changed for the worst.
The addition of costly debt conditions is a changing profile for holders of sovereign bonds, said the OECD. While political decision -makers unroll the purchase programs for emergency bonds, the assets of the Central Bank of State Bonds have dropped 3 TN from their 2021 peak and should fall by an additional 1 TN this year.
This means that private investors – who, according to Di Noia, were “more sensitive to prices” – will invent the difference. The sensitivity leaves the transmitters open to more volatility and makes them more exposed to “increased geopolitical and macroeconomic uncertainty”, he added.
