According to the latest Global Debt Monitor from the Institute of International Finance (IIF), the public debt of the United Arab Emirates (UAE) decreased to 31 percent of GDP in the second quarter of 2026, compared to 32.9 percent the previous year.
This figure is among the lowest among major economies included in the report. At the same time, the IIF warned that global debt exceeded the mark of $365 trillion (equivalent to 1.339 trillion dirhams).
Although government borrowing relative to output volume decreased, other sectors of the UAE economy increased their debt burden. The financial sector's debt grew to 55.8 percent of GDP from 51.9 percent, which was the most significant increase among all sectors in the country. Corporate debt of non-financial companies also rose to 53.6 percent from 52.7 percent, and household debt increased to 25.8 percent from 24.2 percent.
In Saudi Arabia, public debt increased to 34.3 percent of GDP compared to 28.9 percent the previous year, representing an increase of 5.4 percentage points. The financial sector in the Kingdom increased its debt to 13 percent from 10.2 percent, corporate debt reached 46.6 percent from 45.2 percent, and household debt rose to 31.7 percent from 31.2 percent.
The IIF noted that Saudi Arabia is among the leading issuers of emerging market sovereign Eurobonds this year, alongside Mexico, Poland, and Turkey. The Kingdom's foreign currency public debt stands at 13.3 percent of GDP, and this entire amount is denominated in US dollars.
Across the Middle East, the average public debt was 35.9 percent of GDP, higher than 32.3 percent. Kuwait's debt rose to 18.6 percent from 8.8 percent, and Bahrain's rose to 150 percent from 139.4 percent.
Globally, debt increased by more than $10 trillion in the first half of 2026. This is less than half of the increase of $21 trillion during the same period last year. The IIF explains this by stating that higher interest rates, sharp increases in energy prices, and the conflict with Iran have put pressure on borrowers.
Most of the growth is attributed to emerging markets, where debt increased by $6.5 trillion, reaching over $110 trillion, with China leading this growth. Excluding China, emerging market debt reached a record $38 trillion.
The ratio of global debt to GDP is about 310 percent, which is approximately 25 percentage points lower than the peak at the beginning of 2021. The IIF cautions that this reflects nominal growth due to inflation rather than a real reduction in debt burden.
Average costs for government borrowing in G7 countries are the highest since mid-2008, with annual interest expenses nearly 85 percent higher. Developed economies paid over $3.3 trillion in interest on international government bonds last year. This amount exceeds estimated global spending on defense ($3.1 trillion), artificial intelligence ($2.6 trillion), and clean energy ($2.3 trillion).
The IIF points out that persistent deficits in the US, France, the UK, and Japan replicate problems long associated with developing markets under debt stress. It warns that elections, including midterm elections in the US and national elections in France, Spain, and Italy in 2027, could weaken fiscal discipline.
Corporate debt of non-financial companies in the US reached $24 trillion amid a surge in AI-related borrowing. Private credit now accounts for just over 5 percent of this debt, compared to about 1 percent in 2014. The IIF found little evidence that AI-related bond issuance is displacing government borrowing but noted that the situation could change if corporate bond ages increase.
The IIF forecasts that healthcare, energy, AI, and IT expenditures, along with defense, will total about $25 trillion this year, roughly one-fifth of global output. It notes that the growing share of these expenditures will be financed through markets, indicating a sustainable future for bond placement. Rising healthcare and state pension costs create additional pressure on public finances.
Emerging markets face record $3.5 trillion in debt repayments in 2026, yet financing conditions remain favorable. A weaker dollar has helped, and even vulnerable borrowers like Bolivia and Gabon have returned to international markets. The IIF urged governments to use this period to strengthen investor relations and noted that Senegal's debt restructuring under the Common Framework will be a key test for emerging country sentiment.
The ESG debt market reached approximately $9 trillion by mid-September, up from $7.8 trillion at the end of 2025, with green bond issuance expected to set an annual record.