Global debt marches to record high

LONDON, Feb 25 (Reuters): The global debt-to-GDP ratio rose for the first time since 2020 last year, as the world's debt stock hit a new year-end record of $318 trillion and economic growth slowed, an Institute of International Finance report showed on Tuesday.

The $7 trillion rise in global debt was less than half of the 2023 increase, when expectations of Federal Reserve interest rate cuts sparked a borrowing surge. The IIF warned, however, that so-called bond vigilantes could punish governments if rising fiscal deficits persist.

"The increasing scrutiny of fiscal balances - particularly in countries with highly polarized political landscapes - has been a defining feature of recent years," the IIF said.

Market reactions to fiscal policies in the United Kingdom brought down the short-lived tenure of Prime Minister Liz Truss in 2022, while similar pressures in France ousted Prime Minister Michel Barnier last year.

Debt-to-GDP - an indicator on the ability to repay debt - approached 328%, a 1.5 percentage point increase, as government debt levels of $95 trillion clashed with slowing inflation and economic growth.

The IIF said it expects debt growth to slow this year, amid unprecedented global economic policy uncertainty and still-elevated borrowing costs.