As per a recent report by the Institute of International Finance (IIF), the global debt has surged to an unprecedented high of USD 307 trillion during the second quarter of 2023, setting off alarm bells in the financial world. This record-breaking increase has also propelled the global debt-to-GDP ratio to 336 per cent, marking the second consecutive quarter of its rise after seven quarters of decline. Global debt is a broad term that encompasses the financial obligations of governments, businesses, and individuals across the globe. In a way, it can be said to represent a broad-based economic interconnectedness, reflecting the cooperative and mutually advantageous spirit to leverage resources collectively to stimulate growth and development. However, as the IIF report highlights, the exponential growth in debt comes with its own set of challenges and implications for the global economy. What makes the present surge in global debt even more intriguing is the backdrop against which it has unfolded. In a period when central banks worldwide had been consistently raising interest rates, one would naturally expect a constrained credit scenario. Typically, rising interest rates tend to discourage borrowing, making it less favourable for entities to seek additional debt or loans. Yet, despite this tightening monetary policy, the global debt figure has, quite surprisingly, continued to climb. It's essential to contextualize this increase in global debt within the broader economic narrative. Contrary to popular perception, the rise in global debt isn't entirely unusual. Instead, what stood out was the trend leading up to 2023 – seven consecutive quarters of declining global debt as a share of GDP. One factor contributing to this phenomenon was the surge in inflation during that period. Governments, facing mounting debt burdens, sought to alleviate their fiscal constraints by letting inflation chip away at the real value of their debts in local currencies. This practice, known as "inflating away of debts," is typically a deliberate strategy employed by governments when their debt is denominated in their own currency. By allowing inflation to erode the purchasing power of their currency, governments effectively reduce the real value of their debt over time. While it's primarily seen as a fiscal manoeuvre, it's worth noting that the rise in inflation can also occur independently of government actions. However, what's crucial is the maintenance of strict vigil on the global debt and its share in the GDP. The primary concern has been the issue around debt sustainability, especially as major political events loom large on the horizon, such as general elections and numerous state assembly elections. As governments face the temptation to resort to populist measures while grappling with limited revenue sources, the risk of accumulating even more debt becomes a real threat to economic stability. Furthermore, it's not just government debt that's on the rise. The private sector is also experiencing an uptick in borrowing. This necessitates strict oversight, particularly in monitoring household and non-financial corporate debt to prevent it from spiralling out of control. The 2008 financial crisis serves as a stark reminder of the consequences of leniency towards private players in terms of debt accumulation. To sum up, the recent surge in global debt is a cause for concern that should not be underestimated. While governments may be tempted to borrow more to meet immediate expenses, it's crucial to exercise fiscal responsibility and avoid exacerbating the debt burden. The sustainability of debt levels, especially in the face of political pressures and rising private sector borrowing, is a challenge that requires careful management. In an ever-changing global economy, vigilance and prudent economic policies are essential to ensure long-term financial stability and economic growth for all.