Visualized: The Rising Cost of Government Debt

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Visualized: The Rising Cost of Government Debt

August 16, 2024

Governments around the world took on massive debt to fuel stimulus efforts during the pandemic, and today's high interest rate environment is making the cost of servicing national debt more expensive. While the previous decade of low interest rates made debt loads easier to manage, many of the world's governments are devoting an increasing share of revenue to debt servicing. America spends roughly $2 billion each day on servicing our debts, and the cost is only expected to increase.

To provide a sense of how expensive government debt loads have become, and how those costs are largely expected to increase in coming years, our friends at Visual Capitalist have compiled the following infographic, based on an analysis from the Institute of International Finance.

The infographic provides the 2021 and 2023 annual average net interest expense and compares those against projected forecasts of the annual average for 2024 and 2026.

America leads the way, with debt costs expected to rise to 10.9% in the coming years. By contrast, countries like Norway and Denmark are expected to see the earnings they make on their investments exceed the cost of servicing debt. This is due to unique debt dynamics that have seen some central holding foreign debt that provides more income than what the country owes to foreign borrowers. Other factors, such as foreign exchange reserves and currency depreciation against primary trading partners can also benefit a country's debt position.

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