The world’s governments face a $2tn debt-servicing burden that now exceeds defence spending in the UK, France, and the US. OECD nations are projected to borrow $18tn this year, with total debt-servicing costs exceeding 3% of GDP in 2025. Rising bond yields, driven by inflation, reduced quantitative easing, and increased borrowing, have pushed the average G7 10-year yield to 4% — its highest since 2008.

The US government’s debt reached a record $40tn last month. In the UK, interest payments now total £110bn annually, contributing to political instability, including the downfall of Liz Truss in 2022 and frequent leadership changes in France. John Healey, UK Chancellor of the Exchequer, warned that debt interest consumes £1 in every £10 of public spending, surpassing defence, the Home Office, and justice combined.

Mike Riddell of Fidelity International noted global investors are growing anxious as sovereign debt is refinanced at ever-higher rates. While some economists argue stronger growth could ease the burden, current low-growth, high-debt economies face stark choices between tax hikes and austerity. The situation marks a stark reversal from the post-2008 era of low rates and rising debt, now replaced by record borrowing costs amid soaring obligations.