The world has never been more indebted after a year of battling Covid-19. And there’s even more borrowing ahead.

Governments, companies and households raised $24 trillion last year to offset the pandemic’s economic toll, bringing the global debt total to an all-time high of $281 trillion by the end of 2020, or more than 355% of global GDP, according to the Institute of International Finance. They may have little choice but to keep borrowing in 2021, said Washington-based director of sustainability research Emre Tiftik and economist Khadija Mahmood.

Even as vaccines are rolled out, low central bank policy rates are keeping issuance above pre-pandemic levels. Governments with big budget deficits are set to increase debt by another $10 trillion this year as political and social pressures make it hard to curb spending, pushing this group’s debt load past $92 trillion by end-2021, the IIF estimates.

“The most important challenge is to find a well-designed exit strategy from these extraordinary fiscal measures,” Tiftik said during a Wednesday webinar.

Both mature and emerging markets will be searching for a perfect balance. While an economic recovery may lead some governments to start developing strategies to roll back stimulus, doing so too soon could magnify default and bankruptcy risk. But waiting too long could lead to unwieldy debt loads.

Even amid historically muted credit spreads, global debt markets have started selling off, pushing up sovereign yields. Long-term U.S. Treasury yields reached the highest in about a year this week.

Heavy Load

Global debt climbed to all-time high of $281 trillion last year

Source: Institute of International Finance

Increases in non-financial industry debt-to-GDP ratios in France, Spain and Greece were among the sharpest in mature economies, as governments rapidly ramped up borrowing. In emerging markets, China saw the biggest jump in debt ratios last year, followed by Turkey, Korea and the United Arab Emirates, IIF data show.

Here’s what else to know:

  • Non-financial corporates are becoming more reliant on government support, which may exacerbate pre-existing vulnerabilities
  • Financial corporates had the biggest annual jump in debt ratios in over a decade, according to the IIF; It was the first year-over-year rise since 2016
  • In emerging markets, South Africa and India had the biggest increases in government debt ratios last year; Corporate debt accumulation was greatest in Peru and Russia
  • Foreign-currency debt in the developing world lingered near $8.6 trillion in 2020 “as sharp losses in EM currencies reduced firms’ incentives to borrow in foreign currency,” according to the IIF