It is believed that the surging debt was driven by emerging economies (EM), which has led to an increase in borrowing of US$3 trillion to US$65 trillion. This amounts to 218 percent of their combined economic output, which is five percent higher than the previous year.
"Growth in global debt has slowed over the past several years, particularly in mature economies. However, with EM economies borrowing more heavily, global debt has set a new record high of US$217 trillion (over 327 percent of GDP) in early 2017," the IFF report states.
The IIF report also states that the biggest contributor was China with US$2 trillion, in June 2017 the International Monetary Fund urged Beijing to tackle this escalating debt and they describe it as "unusually high for a developing economy." Some estimates say China's debt stands at 260 percent of its GDP.
Advanced economies have cut debt levels by US$2 trillion over the past year. However, the US is approaching US$20 trillion, almost 10 percent of global debt.
"Rising debt may create headwinds for long-term growth and eventually pose risks for financial stability," the report said.
"In some cases, this sharp debt build-up has already started to become a drag on sovereign credit profiles, including in countries such as China and Canada," it added.
Emerging hard currency-denominated debt, grew by US$200 billion in the past year — growing at its fastest pace since 2014. The report has also found that 70 percent of the debt is in dollars.
The report did highlight that the US and the EU could increase interest rates in the near future, thus making it more expensive for borrowers to repay.