Dareen Cone 
According to an estimate by The Economist, global interest spending has passed the $13 trillion mark. At the same time, 14.5 percent of global gross domestic product is spent on interest payments.
After a decade of nearly flat interest rates, inflation is forcing central bankers to take a more aggressive approach. The higher the global debt, the more sensitive it is to interest rate hikes.
The Economist analyzed the impact of debt and rising interest rates on companies, individuals and governments in 58 countries. In doing so, the experts reached the following conclusions about the impact of the global economy on interest rates:
What Is The Interest Rate Burden In The Global Economy?
In 58 economies accounting for 90 percent of global GDP, 14.5 percent of total income is spent on interest. The interest burden in these countries is more than $13 trillion. According to calculations by The Economist, interest as a share of total income will rise from 14.5 percent to 20 percent if central banks continue to raise interest rates in response to inflation.
Total Debt Is $13 Trillion
With inflation at an all-time high due to the ongoing crisis in Ukraine, 58 economies raised interest rates by an average of 2.6 percent in the first quarter of 2021. In the first quarter of 2022, the average increase was 7.1 percent.
The total debt of these countries is $298 trillion, or 342 percent of their gross domestic product. Before the pandemic, the debt of these economies, which account for 90 percent of the global economy, was $255 trillion, and the debt-to-GDP ratio was 320 percent.
The higher the debt, the more sensitive the economy is to interest rate hikes. The Economist assessed the amount of interest payments made by businesses, consumers and governments in these countries. In 2021, the total interest burden of 58 countries was $10.4 trillion. Interest expenditures accounted for 12 percent of total income. In 2022, this figure will rise to $13 trillion, or 14.5 percent of GDP.
An Enormous Interest Burden Is Accumulating In The United States
Sven Henrich, creator of NorthmanTrader, estimates that interest payments in the United States will exceed $1.5 trillion by 2023. According to a study by Cointelegraph, the country’s interest burden has increased by 42 percent since March 2020, surpassing the burden of the entire cryptocurrency sector. Henrich announced that $853 billion in interest will be spent on $31 trillion in federal debt in 2022: This figure exceeds the 2023 defense budget. If the Federal Reserve maintains current interest rates or raises them, U.S. interest payments will exceed $1.2 to $1.5 trillion.
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