Who does the world owe — and why does it not have to repay everything at once?

Svet za 5 minút · approximately 10 minutes to read · updated 30 September 2026

According to the Institute of International Finance, at the end of 2025 the world’s governments owed approximately 107 trillion dollars. More precisely, 106.7 trillion. Rounded and written out in full: 107,000,000,000,000 dollars. This amount covers governments, not all borrowing by companies, banks and households combined. [1]

A sum like this naturally raises questions: Who do we actually owe? When will it all be repaid? And if my fund lent money to the government, will I get my money back when I need it?

The most important thing is to distinguish three things: government debt, an investor’s assets and the availability of money for withdrawal. They are connected, but they are not the same thing.

1. The world does not owe someone outside the world

“Global debt” does not mean that the whole planet has one loan from a mysterious creditor. It is the sum of a large number of obligations. On one side is a borrower; on the other is someone entitled to repayment.

Governments borrow from domestic and foreign investors, banks, investment and pension funds, insurance companies and other public institutions. Central banks can also hold government bonds. [2]

That means you may indirectly own part of the government debt too. If your fund holds government bonds in its portfolio, your holding in the fund gives you a share in their value and returns.

However, this does not mean every fund lends to governments. An equity fund may hold mostly shares, while another fund may hold property. What matters is the specific portfolio, not the word “fund” itself.

2. What exactly does an investor buy?

Imagine a simplified example: a government issues a five-year bond for €100. It promises to pay €3 in interest each year and return €100 after five years.

An investor hands over money and receives a bond. The state acquires a liability. The investor acquires a financial asset: a claim to the agreed payments. Maturity, interest arrangements and terms vary between individual bonds. [3]

A bond is therefore not a banknote stored in a drawer. It is a contractual claim. It can be held until maturity, and tradable bonds can also be sold to someone else. [4]

An investor lends because they expect a return. In doing so, they choose what risk they are willing to take. Even the word “government” does not automatically mean risk-free.

3. Does a government have to repay its debt at all?

Individual obligations, yes, under the agreed terms. It does not have to bring its entire debt down to zero on a single date.

A government does not have one huge bill with a single due date. It has many bond issues and other liabilities: some are due soon, others in years or decades. [3]

When an old bond matures, the government needs money to repay it. It obtains that money from budget revenues, cash reserves or new financing. For example, it issues a new bond and uses the proceeds to repay the old one. This is called refinancing. [5]

In our example, the original investor gets their €100 back. Meanwhile, a new investor lends the state another €100. The old liability ends and a new one is created. This step alone does not change the total amount of debt.

For the original investor, this is not an endless wait. They have been paid. The state, however, still owes someone else.

4. So can you keep borrowing forever?

Debt can exist for a very long time. That does not mean, however, that it can grow without limits or that new money will always be cheap and available.

Investors monitor a government’s ability to pay. If they lose confidence, they may demand higher interest or refuse to provide financing. New borrowing then becomes more expensive, and refinancing gradually raises the cost of servicing existing debt too. If conditions deteriorate severely, the government may be unable to raise enough money. [6]

So the number of zeros is not the only thing that matters. Interest rates, maturity dates, the currency of the debt, budget revenue and economic developments matter too. A country with longer maturities is in a different position from one that must roll over a large share of its debt this year. [6]

This is also why we compare debt to GDP. GDP roughly represents the size of annual economic output. It is not the balance in the government’s account or its annual tax revenue.

For illustration: if debt stays at 100 and GDP grows from 100 to 125, the debt-to-GDP ratio falls from 100% to 80%. Yet the state has not repaid a single unit of principal. The ratio has improved, but not necessarily every aspect of its finances.

5. If I want to withdraw money from a fund, do I wait for the government?

Under normal circumstances, no.

In a conventional open-ended mutual fund, you own a share of the portfolio. When you request redemption of your units, their value is determined according to the fund’s rules and the value of its assets after liabilities are deducted. You are not withdrawing the particular banknote you once deposited. [7]

A fund can cover payouts using available cash or by selling some investments. With a tradable bond, it does not have to wait for the government to repay it: another investor can buy it. The right to future payments passes to the new owner. [4]

Our five-year bond can therefore change hands after just one year. The state continues paying under the original terms, even though the investor who originally lent it money has already exited the investment.

However, being able to sell does not guarantee the same price. Your fund holding may have a different value when you withdraw it than when you bought it. Pension products or less liquid funds may also have additional withdrawal restrictions. Check the product documentation for specific time limits and conditions. [7, 8]

6. Why can a fund fall in value even when the government pays normally?

Imagine your bond pays €3 a year on an amount of €100. Later, comparable new bonds appear that pay €5 a year at a price of €100.

A buyer will not be willing to pay the same price for an older, lower-yielding bond just because that is what you paid for it. Its market price will generally fall. The exact decline depends, among other things, on the time remaining until maturity and other terms. [8]

There is therefore an important distinction: the state can meet its obligations, and a bond fund can still temporarily show a loss.

When holding a particular conventional bond to maturity, an investor receives the agreed face value if the issuer fulfils its obligation. A fund, however, holds an entire changing collection of investments, and a unit in it is not automatically guaranteed to return to your purchase price. [3, 8]

7. And the money in a bank account?

A bank account represents a different relationship from a holding in a fund. Your account holds a claim against the bank. You have no direct claim to a specific bond owned by the bank.

A bank holds various assets: loans, securities and liquid funds. It also processes incoming and outgoing payments. It ensures that money is available for routine withdrawals and manages its funding. It does not wait for a particular borrower to repay a particular loan every time someone makes a withdrawal. [9, 10]

Also, the idea that a bank simply takes the money you deposited and passes that exact money to someone else is too simplistic. When banks lend, they also create new deposits; however, their ability to lend is constrained by factors including risk, capital, liquidity and supervisory rules. [11]

For your question, this is enough: the fact that a bank owns a bond maturing in ten years does not, by itself, mean you cannot withdraw money from your current account for ten years.

8. What if everyone wants to withdraw their money at once?

That is a different situation. Long-term assets may not be immediately convertible into cash at a good price. Under intense pressure, a forced sale may result in a loss.

Let’s therefore distinguish lack of liquidity and insufficient assets to cover liabilities. The first means difficulty securing money in time. The second means a deeper problem with the ability to meet obligations. One can develop into the other, but they are not synonyms. Access to liquidity is one of the reasons central banks provide financing to banks under specified conditions. [10]

It is therefore incorrect to claim either “the state has not paid yet, so you will not get your money” or “the money is immediately available under all circumstances”. It depends on the product, its terms and the institution's situation.

9. Why not simply wipe out all debts?

A bond is a liability of the state, but also an asset of its holder. If the liability is forgiven without compensation, the creditor loses the claim or part of it. If a fund owns it, this can reduce the value of people’s investments in the fund.

Not every write-off of government debt automatically wipes out bank deposits. It depends on who holds the debt, how large the loss is and who ultimately bears it. Debt and savings are not two piles that can simply be swapped for one another.

Nevertheless, forgiving part of the debt can be part of the solution when debt is unsustainable. Restructuring can involve agreements on new maturities, lower payments or a reduction in principal, for example. Creditors may find an agreement more acceptable than an uncontrolled default. But it does not erase the problem at no cost. [12]

So the question is not just “how much does the government owe?”. Equally important is: To whom? At what interest rate? Until when? And what can it use to pay?

10. Why do rising bond yields also affect your mortgage, stocks and gold?

When you hear in the news that government bond yields are rising, it is not just a number for investors. It is also about the price at which governments, companies and households borrow money.

First, an apparent paradox: a rising yield does not mean an existing bond has become more expensive. For a bond with fixed payments, the opposite is true — when its price falls, the yield for a new buyer rises. The interest originally agreed with the existing holder does not automatically increase. [8]

New borrowing becomes more expensive for the government. If investors demand a higher yield, the government generally has to offer more favourable terms when issuing new bonds. Existing fixed-rate debt does not become more expensive overnight. Higher costs arrive gradually as the government issues additional debt or replaces maturing obligations with new ones. [3, 6]

Imagine a government borrows one billion euros at an interest rate of 2%. It pays 20 million euros in interest each year. At 4%, that becomes 40 million. The same amount borrowed, but twice the interest — and less room in the budget for other spending.

More expensive money can also feed through to mortgages. Their rates depend in part on banks’ funding costs and market interest rates. If these costs rise, banks may raise rates on new mortgages or offers when a fixed-rate period ends. An existing fixed-rate mortgage therefore does not automatically change during the agreed fixed-rate period. [13, 14]

This is not a direct conversion, however: a one-percentage-point rise in a US bond yield does not mean an identical increase in a Slovak mortgage rate. Euro interest rates, competition between banks and the particular loan also matter. [13, 14]

Stocks can come under pressure from two directions. Loans become more expensive for companies, which can reduce their profits. At the same time, higher interest rates lead investors to assign a lower present value to future profits. Interest-bearing investments also become more attractive competitors. But if companies increase profits substantially, stocks can rise despite higher bond yields. [13]

And gold? It pays no interest. When safer interest-bearing investments offer higher yields, holding gold may become relatively less attractive. Real yields — yields adjusted for inflation — are particularly important. But uncertainty, the dollar and central bank purchases also affect gold, so it does not have to fall every time yields rise. [15]

So when you hear that “money is getting more expensive”, it means borrowing it may cost more. This is where enormous government debts connect with household budgets and the value of investments.

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Sources and notes

The text explains general principles; the examples involving €100 and interest rates of 3% and 5% are illustrative. The opening figure is for the end of 2025, not a live total. Different databases use different coverage and methods, so their debt totals may not match. References to US and British institutions support the general mechanisms, not the specific terms of a Czech or Slovak product.

1. Reuters / IIF, February 25, 2026: Government spending lifts global debt to a record $348 trillion in 2025. Government debt of USD 106.7 trillion; broader total debt of USD 348 trillion.
2. IMF: What Is Sovereign Debt?. Who lends to governments and why.
3. U.S. Treasury: About Treasury Marketable Securities and Redeeming Treasury Marketable Securities. Types, maturity and repayment of bonds.
4. U.S. Treasury: Selling a Treasury Marketable Security. Selling tradable bonds before maturity.
5. U.S. Treasury: FAQs about Treasury Securities Buybacks. Using new financing to buy back and repay existing obligations.
6. IMF: Dealing with Sovereign Debt — The IMF Perspective. Debt sustainability and financing needs.
7. SEC / Investor.gov: Mutual Funds and Net Asset Value. A stake in a fund and its value upon redemption.
8. SEC / Investor.gov: Bond Funds and Income Funds and How to Read a Mutual Fund Prospectus. Interest rate risk and fund terms.
9. Bank of England: What do banks do?. Deposits, loans and payment services.
10. Bank of England: Market Operations Guide: Our objectives. Reserves, payment settlement and liquidity.
11. Bank of England: Money creation in the modern economy. Why banks are not merely intermediaries for existing deposits.
12. IMF: Questions and Answers on Sovereign Debt Issues and Sovereign Debt. Restructuring and addressing unsustainable debt.
13. ECB: How interest rates feed through to the economy. Loans, funding and asset prices.
14. Bank of England: Mortgage market analysis — Monetary Policy Report, August 2025. The link between market interest rates and mortgage pricing; a UK example of the general mechanism.
15. World Gold Council: Interest rates and gold — Gold and US interest rates: a reality check. Real yields and other factors that influence gold.