For 2025, we expect a 3% year-on-year surge in sovereign commercial borrowing. This continues a steady increase since 2022. With lingering inflationary pressures and uncertainty about global trade policy, interest rates might not come down that much, implying still-high funding costs for large developed market issuers.

The U.S. remains by far the largest sovereign issuer in 2025, with projected gross long-term borrowing of $4.9 trillion. After overtaking Japan last year, we project China to remain the second-largest sovereign borrower, with gross commercial issuance equivalent to $2.1 trillion. This marks the largest nominal increase, by over $370 billion (or 22%), of all sovereigns in our 2025 borrowing report. These projections reflect our anticipation of expansionary fiscal policy in China and the U.S. this year.

In the rest of the world, however, we expect borrowing to remain broadly flat in 2025 compared to 2024, albeit very high (see chart 1)--in fact, higher than in any year over the past decade apart from the height of the pandemic in 2020. Stronger fiscal and debt paths outside G-7 countries and China partly explain why the balance of our rating outlooks on sovereigns is positive.

Chart 1

Fiscal pressures and expansionary policies in many large economies, most prominently the U.S. and China, might contrast with more restrained debt trajectories in other markets. Fiscal trajectories appear more favorable in many other countries, which ties in with our positive outlook balance of 13 (positive minus negative outlooks; see chart 2).

Chart 2

Government interest spending is likely to remain high; the cost of new and existing debt is up on the last 10 years. In this context, we expect sovereign long-term borrowing will stay well above levels seen before multiple shocks hit the global economy, starting with the pandemic in 2020. As we highlighted in last year's sovereign borrowing report, increasing spending as a crisis response is difficult to contain and roll back--fiscal buffers are reduced and sovereign funding conditions can prove more volatile amid global macroeconomic uncertainty (see "Sovereign Debt 2024: Borrowing Will Hit New Post-Pandemic Highs," published Feb. 27, 2024).

We project that our 139 rated sovereigns will borrow the equivalent of $12.3 trillion from long-term commercial sources in 2025.   This is a 3% increase from 2024 and more than 60% above the levels recorded before 2020 (see table 1). All numbers in this report are converted into U.S. dollars, so exchange-rate movements also influence borrowing trends.

Table 1

Expansionary fiscal policy propels government borrowing  Fiscal deficits are likely to remain high, especially among the largest borrowers, namely the U.S., China, Japan, and Europe. China's announced fiscal stimulus is expected to drive up borrowing, with net borrowing set to increase by more than 50% in nominal terms in 2025. In Europe, government borrowing will rise substantially as the continent shores up its defense capabilities.

Elevated gross borrowing also reflects substantial debt-refinancing needs.   Upticks in economic and geopolitical uncertainty in recent years have led many sovereigns to accelerate short-term borrowing. For example, in the U.S., the share of short-term debt in the total debt stock has been over 20% since 2023, about 10 percentage points higher compared to 10 years ago. The estimated average share of short-term debt in the global stock of sovereign debt was 14.6% in 2024, almost 50% higher than the 9.8% recorded in 2018. In tandem with a broadly stagnant average long-term debt maturity over the past two years of about 8.5 years, the rollover ratios for many sovereigns remain high (see table 4). This trend will likely be more pronounced in lower-rated emerging market sovereigns, where we have observed a shift to domestic borrowing, with shorter average maturities, as access to international markets has become more difficult. The cost of domestic debt has also increased because the sizable amount in debt issuance since the onset of the pandemic has reduced domestic markets' capacity to further absorb new longer-term debt.

The U.S. continues to post the largest nominal commercial borrowing among all sovereigns, with its deficits likely to remain elevated.   We project U.S. long-term borrowing will reach $4.9 trillion, which is $200 billion higher than in 2024. The U.S.'s share of global long-term borrowing will be 40% this year (39% in 2024), which is slightly above its decade average. Our forecasts reflect the U.S.'s wide fiscal deficits, high interest spending, and substantial debt refinancing requirements. We project that U.S. general government deficits will likely exceed 6% of GDP by 2026, pending more clarity on actual policy implementation and provided net general government debt rises toward 100% of GDP. The dollar's status as the world's premier reserve currency affords the U.S. significant flexibility in its fiscal and external accounts, which we assume will continue.

European sovereigns will maintain their high borrowing levels amid concerns about weak fiscal positions.   European sovereigns--including Italy, Germany, and France, also among the largest global issuers in absolute terms--will keep borrowing broadly flat versus 2024, albeit at highs of almost $380 billion (a 7% year-on-year decrease) for Italy, almost $340 billion for France, and $290 billion for Germany. The U.K. will reduce its issuance slightly to around $330 billion following last year's surge. As central banks have replaced government bond purchases with government bond sales, the supply of government debt has further increased in the financial markets. This--alongside fears of more persistent inflationary pressures in the U.S., potential deflation in China, outright stagflation in the U.K., a more volatile economic outlook, and increasing fragmentation globally--has led to steeper yields and renewed investor concerns about weak fiscal positions in many advanced economies.

In addition, The European Commission has proposed to relax the bloc's fiscal rules to accommodate more defense spending. At the same time, many European governments are grappling with high debt and large deficits and remain sensitive to market conditions. Even Central and Eastern European sovereigns, notwithstanding their high defense commitments, would likely struggle to sustain further military spending amid slowing economic growth, aging populations, and rising social costs. Therefore, limited fiscal space at the national level is pushing EU policymakers to explore alternative options to boost defense spending, including potential collective borrowing solutions (see "European Defense Funding: What Are The Options?," published Feb. 13, 2025).

Most of these sovereigns have some of the longest-dated debt profiles (including treasury bills) globally. Except for the U.K., most have limited indexed obligations. That means the higher cost of raising new debt generally affects the overall debt servicing costs for the whole debt stock only gradually (see chart 5). Nonetheless, we expect cost-of-financing pressures to remain a theme throughout 2025.

Modest growth and persistent spending pressures amid political uncertainty will also keep long-term borrowing for large Latin American sovereigns elevated.   The two largest issuers, Brazil and Mexico, will borrow the equivalent of $280 billion and $170 billion, respectively, slightly down on 2024. This reflects Mexico's lower fiscal deficit amid lower investment spending and Brazil's continued high deficits, as well as high roll-over needs of around 20% of the total debt stock for both. Mexico will also raise debt on behalf of state-owned Pemex in 2025. We project Argentina's borrowing will stay broadly flat in 2025, following the drop last year, as a result of rapid fiscal rebalancing and reflecting exchange-rate depreciation (see table 3).

Asia-Pacific sovereign borrowing is surging, driven by China's fiscal stimulus.  China's projected 2025 nominal gross borrowing increase of $370 billion outpaces all other sovereigns globally. All up, we forecast Asia-Pacific governments will borrow $4.2 trillion this year, after an estimated $3.9 trillion in 2024. This trend mostly reflects China's anticipated fiscal stimulus, whereas we expect smaller 2025 issuances out of Japan. Korea and India will keep issuance broadly stable, while there will be an uptick in Australia, albeit its borrowing remains modest. Notably, China is increasing its borrowing in 2025 by 22% to $2.1 trillion. This reflects our expectation that its fiscal policy will be expansionary, to support its economic recovery via fiscal transfers. We also note the exchange-rate effect that correspondingly reduces or increases the U.S. dollar value of local-currency borrowing for sovereigns with depreciating or appreciating currencies.

Debt will be more costly to service in the era of higher interest rates and potentially more volatile conditions.   Amid uncertainties about future U.S. trade policy and lingering inflationary pressures, we anticipate that central banks will not go back to the historically low interest rates seen before and during the pandemic. This will underpin higher-for-longer costs of financing for developed market sovereigns, in our view.

Central banks in many key emerging markets have been lowering their policy rates for more than a year. We now expect they will be cautious about cutting rates, to avoid a rapid narrowing of interest rate differentials with the U.S. The interest rate differential between emerging markets and the U.S. is a key driver of capital flows, and we now anticipate just one 25 basis point rate cut from the Federal Reserve this year. That said, if the U.S.'s recent policy announcements with respect to public spending and public sector workers, among others, affect demand, then inflationary pressures could come down further than expected and allow more scope for lower interest rates.

Issuance costs have surged in recent years.   Despite the larger share of inflation-indexed debt for some, it will still take time for current high market rates to spill over into the effective cost of servicing the stock of government debt in many advanced economies. This is because these governments benefit from generally longer-term debt maturities offered by their deep domestic capital markets. We note that the effective interest rate is still well below the rates of before the global financial crisis (2007-2009) for many, albeit not all, developed markets (see charts 3 to 6).

Chart 3

Chart 4

Chart 5

Chart 6

Some emerging markets might see less benign funding conditions in 2025 than previously expected.  Higher term premia and rising long-term emerging markets yields could further tighten financing conditions for emerging market sovereign borrowers. Given their generally shorter debt profiles, the effective interest rates on outstanding debt stocks have risen for many (see charts 7 and 8).

Chart 7

Chart 8

Multiple past shocks have taken their toll on sovereign creditworthiness, leading a greater number of sovereigns to be rated 'B-' or lower; this indicates elevated credit risk in 2025, which could also pose contagion risk for other emerging markets and affect their borrowing costs.   In places where authorities have weaker capacity to mobilize tax revenue and finance critical services, higher debt costs translate into exceptionally high interest burdens, sometimes exceeding one-third of total government revenue (see chart 9). For countries with large debt stocks and a reliance on foreign-currency borrowing, high interest bills represent a notable risk. We rate a significant number of these sovereigns 'B-' or below, signaling the high risk of debt distress.

Chart 9

The global sovereign debt stock continues to increase as a share of GDP.   We estimate sovereign commercial debt as a proportion of GDP will increase to about 70.4% in 2025 from 67.7% in 2024. This is notably lower than the pandemic-induced peak of 74% in 2020. The debt trend is on an upward trajectory, and has been since 2023, reflecting sluggish growth and wide fiscal deficits amid multiple crises (see chart 10).

Chart 10

By end-2025, we project the commercial sovereign debt stock will reach a record of $77 trillion, the most ever in absolute terms.   Nations in the G-7 will contribute around 68% of the total commercial debt stock of all rated sovereigns (see charts 11 and 12). The U.S. is by far the largest sovereign issuer and China took over the second spot from Japan last year.

Chart 11

Chart 12

Investment-grade sovereign borrowing will account for the majority of total issuance.   For 2025, we project that the share of commercial sovereign debt issued by countries rated 'AAA' (foreign currency) will account for a modest 8% of the total estimated commercial debt stock and 5% of total long-term commercial borrowing. Similar to recent years, one-half of the total debt stock will fall into the 'AA' category because three of the top six sovereign debtors (the U.S., the U.K., and France) are in this rating category (see chart 13). Before the global financial crisis, almost 60% of the debt stock was rated 'AAA' (as were the U.S, the U.K., and France) compared with today's 8% (assuming a constant share in global debt). This signifies the substantial credit quality deterioration of a large share of sovereign debt, which we reflected in our ratings.

Chart 13

The share of the debt stock and long-term commercial borrowing by sovereign issuers rated in the 'BB' category or below (speculative-grade) accounts for about 6% and 7%, respectively, of the global total, similar to recent years.   Brazil, accounting for about $284 billion (or 2.3%) of global sovereign commercial borrowing, remains by far the largest speculative-grade borrower this year. Among all sovereign borrowers, it ranks at 10 (see table 2). Argentina, Turkiye, and Egypt are other speculative-grade borrowers in the top 20 sovereigns by absolute borrowing volumes in 2025, but each account for less than 1% of the global total.

Sovereign sustainable bond issuance in 2025 will be slightly below the historical high seen in 2024.   In 2024, the sovereign issuance of green, social, sustainable, and sustainability-linked bonds totaled almost $140 billion, exceeding our initial projections. Government borrowing plans for 2025 indicate that issuance of these types of bonds will be lower than in 2024, but we note that, historically, actual issuance has exceeded initial targets. Issuers from developed markets in Europe, including EU member states, are the main sustainability borrowers from a flow and stock perspective (see charts 14 and 15).

Chart 14

Chart 15

Estimates in this report do not consider sovereigns not rated by S&P Global Ratings.   That said, we view our data as a reliable reflection of global developments in sovereign debt and borrowing given that very few sizable governments are without ratings. Our estimates focus on debt issued by a central government in its own name. We exclude local government and social security debt, as well as debt issued by other public bodies and government-guaranteed obligations. In terms of commercial debt instruments, our estimates for borrowing include bonds, issued either on publicly listed markets or sold as private placements, as well as commercial bank loans. We do not include government debt that some central banks may issue for monetary policy purposes. All reported forecast figures are our own estimates and do not necessarily reflect the sovereign issuers' projections. Our estimates are informed by our expectations regarding central government deficits, our assessment of governments' potential extra budgetary funding needs, and our estimates of debt maturities in 2025. Estimates that we express in U.S. dollars are subject to exchange-rate variations.

This global report summarizes a series of simultaneously released regional sovereign borrowing and debt reports, which we list in the "Related Research" section below. We have produced detailed reports for developed EMEA, emerging EMEA, Asia-Pacific, and the Americas.

Table 2

Table 3

Table 4

Related Research

• Sovereign Debt 2025: EMEA Emerging Markets' Borrowings Will Remain Close To Peak At About US$624 Billion, March 4, 2025
• Sovereign Debt 2025: Developed European Governments To Borrow About $1.8 Trillion, March 4, 2025
• Sovereign Debt 2025: China Stimulus To Help Push Asia-Pacific Central Government Borrowing To US$4.2 Trillion, March 4, 2025
• Sovereign Debt 2025: Up In The U.S.; Down In Latin America, March 4, 2025
• Sovereign Ratings List, Feb. 19, 2025