Global Debt, Financial Stability, and the Road Ahead

The shifting landscape of the global economy is placing new challenges on financial stability and sustainable development, as rising debt levels and changing capital flows put pressure on both advanced and emerging markets.

Currently, global debt is at unparalleled levels due to a series of economic shocks, higher interest rates, and tight fiscal constraints. This situation is especially dire for low-income nations, where escalating borrowing costs are crowding out critical social investments and hampering growth. Importantly, debt itself is not inherently problematic; when effectively managed, it can drive progress by funding infrastructure and transformative social projects. The real issue lies in ensuring that debt is used to build a more equitable and prosperous future, rather than deepening existing inequalities. Alarmingly, billions of people now live in countries that spend more on servicing debt than on essential services such as health or education.

Another key concern is the role of capital flows, which remain indispensable for emerging markets but are becoming increasingly volatile. As the global financial ecosystem evolves, existing safeguards require comprehensive updates to address fresh risks, particularly those posed by the growing prominence of non-bank financial intermediaries (NBFIs). While regulatory frameworks such as bank supervision and global financial standards provide a starting point, they have not yet adapted to the scale and complexity of today's interconnected and cross-border financial activities.

To pave the way forward, it is essential to close information gaps, particularly around high-frequency financial exposures, and to build integrated data systems that offer a complete picture of both traditional and non-traditional financial risks. Advancing transparency, surveillance, and adaptive policies is vital for maintaining global financial security in an era of rapid change.

The direction taken now in managing debt and strengthening financial resilience will profoundly shape opportunities and stability for future generations across the world.