Sovereign Nations’ Long-Term Borrowing Projected to Reach $12.3 Trillion in 2025, with the US Contributing 40% – S&P Global
Sovereign nations’ long-term borrowing is expected to reach $12.3 trillion by 2025, continuing the trend of consistent increases seen in recent years. This surge in borrowing is primarily driven by high fiscal deficits and mounting pressures on government spending, especially in areas such as defense. According to S&P Global, the research arm of S&P Ratings, the U.S. will be the largest contributor to this increase, accounting for 40% of global long-term issuance. The country is projected to raise an additional $200 billion, bringing its total borrowing for 2025 to $4.9 trillion. This is reflective of the ongoing expansionary fiscal policies the U.S. has adopted to address its economic challenges.
China, while trailing the U.S., is expected to remain the second-largest issuer of sovereign debt, with a projected borrowing figure of around $2.1 trillion in 2025. This figure represents the largest nominal increase for China, which is focused on stimulating its economy amidst internal and external economic pressures. In addition to these two major players, other large sovereign borrowers, primarily from G-7 countries, are expected to maintain relatively stable but still high borrowing levels. Discussions in these countries are ongoing about how best to manage and finance the rising defense spending needs in Europe, especially in light of the ongoing geopolitical tensions.
S&P Global’s report highlights that sovereign interest bills are likely to remain elevated due to the expectation that interest rates will not decrease as much as previously anticipated. This continued high borrowing cost is expected to result in sovereign commercial borrowing rising by 3% year-on-year in 2025, marking a steady upward trajectory in borrowing that began in 2022. The combination of persistent inflationary pressures and uncertainty surrounding global trade policies means that interest rates may stay higher for an extended period, further contributing to the high funding costs faced by large developed-market issuers.
The long-term borrowing of sovereign nations in 2025 reflects the need for governments to fund various ongoing commitments, such as defense, infrastructure, and public services, while grappling with fiscal deficits and economic challenges. For the U.S., the combination of an expansionary fiscal policy and the rising costs of public services has led to an increase in debt issuance. As the country continues to focus on economic growth and recovery, this rising borrowing figure may not be sustainable in the long term, especially if interest rates remain elevated.
For China, the increase in sovereign debt issuance comes as the country navigates both external pressures, such as the global economic slowdown, and internal issues, including economic stagnation. The country is focusing on boosting domestic demand and stimulating economic activity through a combination of fiscal spending and monetary easing. However, the large increase in borrowing reflects the challenges faced by China’s policymakers in trying to stimulate its economy while balancing the need to maintain financial stability.
In contrast, borrowing levels in other parts of the world are expected to remain flat, with little change anticipated outside of the major sovereign issuers. Developing nations, which already face higher borrowing costs due to weaker credit ratings, may struggle to keep up with the rising cost of capital. At the same time, higher interest rates and inflationary pressures will continue to place a strain on the fiscal health of many sovereign nations, particularly those with large amounts of outstanding debt.
The ongoing rise in long-term borrowing is indicative of the growing fiscal challenges that many governments are facing. With inflationary pressures still a concern and interest rates likely to stay higher for longer, sovereign debt issuers are confronted with significant fiscal constraints. For developed countries like the U.S. and China, managing these increases in borrowing will require careful fiscal planning and consideration of long-term sustainability. As global debt levels continue to rise, it will be essential for governments to strike a balance between economic growth and financial stability to avoid further exacerbating existing fiscal pressures.
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