The UAE’s government debt declined to 31% of gross domestic product in the second quarter of 2026, down from 32.9% a year earlier, according to the latest Global Debt Monitor from the Institute of International Finance.
The UAE figure was among the lowest recorded for major economies covered by the report, even as total debt across the global economy exceeded $365 trillion (Dh1,339 trillion).
While government debt declined relative to economic output, borrowing increased across other parts of the UAE economy. Financial sector debt rose to 55.8% of GDP from 51.9% a year earlier, representing the largest increase among the country’s main economic sectors.
Non-financial corporate debt also increased, reaching 53.6% of GDP compared with 52.7% a year earlier. Household debt rose to 25.8% from 24.2%.
Saudi Arabia recorded a different trend, with government debt rising to 34.3% of GDP in the second quarter from 28.9% a year earlier. Financial sector debt increased to 13% from 10.2%, while corporate debt rose to 46.6% from 45.2%. Household debt edged up to 31.7% from 31.2%.
The IIF said Saudi Arabia was among the leading emerging-market issuers of sovereign Eurobonds this year, alongside Mexico, Poland and Türkiye. Saudi government debt denominated in foreign currencies stood at 13.3% of GDP, all of it in US dollars.
Across the Middle East, government debt averaged 35.9% of GDP, compared with 32.3% a year earlier. Kuwait’s government debt rose to 18.6% from 8.8%, while Bahrain’s increased to 150% from 139.4%.
Global debt continues to rise
Global debt increased by more than $10 trillion during the first half of 2026, although the increase was less than half the $21 trillion recorded during the same period last year. The IIF attributed the slower increase partly to higher interest rates, rising energy prices and the conflict with Iran.
Emerging markets accounted for most of the increase, with total debt rising by $6.5 trillion to more than $110 trillion. China was the largest contributor, while emerging-market debt excluding China reached a record $38 trillion.
Global debt stood at about 310% of GDP, around 25 percentage points below its early 2021 peak. The IIF said the decline largely reflected higher inflation boosting nominal economic output rather than a broad reduction in underlying debt.
Government borrowing costs are also rising. Average G7 government borrowing costs are at their highest level since mid-2008, while annual interest expenses have increased by almost 85%. Advanced economies paid more than $3.3 trillion in interest on internationally traded government bonds over the past year.
The IIF said global spending on government bond interest now exceeds estimated worldwide spending on defence, AI and clean energy.
The institute expects spending on healthcare, energy, AI, information technology and defence to reach about $25 trillion this year, pointing to continued demand for market financing and further borrowing.
Emerging markets face more than $3.5 trillion in debt redemptions in 2026, a record amount. The IIF said relatively favourable funding conditions and a weaker dollar have helped several borrowers maintain access to international markets.
The ESG debt market also expanded, reaching about $9 trillion by mid-September from $7.8 trillion at the end of 2025, with green bond issuance on track for a record year.
