On countries becoming more debt-ridden, and why that has far-reaching consequences
In Explained’s weekly column, titled ‘GDP: Graphs, Data, Perspectives’, Udit Misra breaks down how high deficits and public debts can impact countries and tax-payers over a long period, and the global trends in recent years.
Sanae Takaichi was recently elected as Japan's prime minister. The country has among the highest public debts globally, at 230% of its GDP. (Reuters)
According to the International Monetary Fund’s latest Fiscal Monitor report, global public debt is projected to rise above 100 per cent of GDP by 2029.
Simply, when governments borrow to cover the gap between what they spend and what they raise in revenues, it is called a deficit. Each year’s deficit adds to the mountain of public debt, or the gross debt of the general government (that is, not just the central government but also the state governments). Typically, this debt is expressed as a percentage of a country’s total GDP.
The IMF finds that at the current rate, global public debt would reach its highest level since 1948. This year is significant because it marks a time when countries across the world, especially in Europe, were borrowing heavily to rebuild their economies after the massive destruction in the wake of the Second World War.
Higher public debt has many adverse consequences. For one, it increases the interest payments that governments (read taxpayers) have to make. That, in turn, forces governments to curtail their spending while raising taxes. Overall, a higher debt-to-GDP ratio shows that governments are inadequately prepared to deal with the next economic shock, which may require them to spend more or tax less.
The overall landscape, however, is quite varied as shown by the heat map in CHART 1. The so-called Advanced Economies are the most stretched in terms of public debt. For instance, Japan’s public debt is 230% of its GDP. What’s worse, across the board, these numbers are likely to get worse by 2030.
CHART 1.
The situation is slightly better when one looks at the data from the so-called Emerging Economies as well as Low-income Developing Countries. However, in most cases, the debt levels are pegged to rise in the coming year.
The size of the debt is going up for a variety of reasons, ranging from increasing demands for government expenditure on defence, climate change-related activities, dealing with disruptive technologies like AI and their impact on jobs, and the need for governments to bolster social safety nets, not to mention calls for higher wages and higher pensions.
The size of the debt is just one aspect of the problem. The cost of raising debt is another.
More often than not, governments simply roll over their debt. In other words, they pay back their old debt by raising new debt. But there was a crucial shift in the interest rate regime over the past five years. While interest rates were very close to zero in the developed countries between the Global Financial Crisis of 2008-09 and the Covid-19 pandemic, they have gone up sharply since then. That’s because central banks across the board have raised interest rates to contain inflation. The net result is that governments have had to borrow at higher interest rates, thus putting a greater burden on their finances.
“The conclusion is inescapable: starting from too high deficits and debts, the persistence of spending above tax revenues will push debt to ever higher heights, threatening sustainability and financial stability,” warned the IMF.
Udit Misra is Senior Associate Editor at The Indian Express. Misra has reported on the Indian economy and policy landscape for the past two decades. He holds a Master’s degree in Economics from the Delhi School of Economics and is a Chevening South Asia Journalism Fellow from the University of Westminster.
Misra is known for explanatory journalism and is a trusted voice among readers not just for simplifying complex economic concepts but also making sense of economic news both in India and abroad.
Professional Focus
He writes three regular columns for the publication.
ExplainSpeaking: A weekly explanatory column that answers the most important questions surrounding the economic and policy developments.
GDP (Graphs, Data, Perspectives): Another weekly column that uses interesting charts and data to provide perspective on an issue dominating the news during the week.
Book, Line & Thinker: A fortnightly column that for reviewing books, both new and old.
Recent Notable Articles (Late 2025)
His recent work focuses heavily on the weakening Indian Rupee, the global impact of U.S. economic policy under Donald Trump, and long-term domestic growth projections:
Currency and Macroeconomics:
"GDP: Anatomy of rupee weakness against the dollar" (Dec 19, 2025) — Investigating why the Rupee remains weak despite India's status as a fast-growing economy.
"GDP: Amid the rupee's fall, how investors are shunning the Indian economy" (Dec 5, 2025).
"Nobel Prize in Economic Sciences 2025: How the winners explained economic growth" (Oct 13, 2025).
Global Geopolitics and Trade:
"Has the US already lost to China? Trump's policies and the shifting global order" (Dec 8, 2025).
"The Great Sanctions Hack: Why economic sanctions don't work the way we expect" (Nov 23, 2025) — Based on former RBI Governor Urjit Patel's new book.
"ExplainSpeaking: How Trump's tariffs have run into an affordability crisis" (Nov 20, 2025).
Domestic Policy and Data:
"GDP: New labour codes and opportunity for India's weakest states" (Nov 28, 2025).
"ExplainSpeaking | Piyush Goyal says India will be a $30 trillion economy in 25 years: Decoding the projections" (Oct 30, 2025) — A critical look at the feasibility of high-growth targets.
"GDP: Examining latest GST collections, and where different states stand" (Nov 7, 2025).
International Economic Comparisons:
"GDP: What ails Germany, world's third-largest economy, and how it could grow" (Nov 14, 2025).
"On the loss of Europe's competitive edge" (Oct 17, 2025).
Signature Style
Udit Misra is known his calm, data-driven, explanation-first economics journalism. He avoids ideological posturing, and writes with the aim of raising the standard of public discourse by providing readers with clarity and understanding of the ground realities.
You can follow him on X (formerly Twitter) at @ieuditmisra
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CHART 1.
