Future sources of economic growth and the conditions required to support them form the focus of this session at the World Economic Forum Annual Meeting 2026.
At Davos 2026, leaders warned that global debt is no longer a background condition but a strategic constraint. With total debt at $251 trillion (235% of GDP), the panel converged on a key distinction: debt that funds consumption increases fragility; debt that funds productive capacity can be self-liquidating. Pakistan’s finance minister argued “debt is not a bad word,” but emerging markets lack “the luxury of having reserve currencies,” making exportable surplus and fiscal discipline central. He cited progress lowering debt-to-GDP from 75% to 70% and pursuing market access via a green Panda bond.
U.S.-centric risks centered on rollover costs, demand for issuance, and policy credibility. Jenny Johnson warned much post-GFC and post-COVID borrowing “has gone to really much more consumption,” while 40% of government debt rolls within three years, raising refinancing exposure. Ron O’Hanley highlighted the missed chance to lock in long-duration funding during the era of financial repression, raising crowding-out risks as defense, infrastructure, and AI compete for capital. Anne Walsh stressed that $2 trillion annual U.S. deficits at full employment are “unprecedented,” and sustainability holds “until it’s not” in the face of shocks. The group also flagged technical pressures: as Japanese yields rise, global buyers may demand higher U.S. term premiums, steepening curves. AI data center financing could add $1 trillion of issuance, testing spreads and downgrade risk.
Hi, everybody. My name is Joanna. I'm an anchor for Bloomberg Television. Delighted to be here today. We are going to be talking about rising global debt levels. And I know there have been a lot of other topics that are perhaps top of mind over the last couple of weeks, but I will say, the topic of rising debt and sovereign debt. Corporate debt, private credit is a recurring theme on our shows and in the discourse around markets. So it's not going anywhere. And I think actually this is a really timely panel to have because I'm going to throw out a few statistics. Total global debt. So this is government plus private sector stood at $251 trillion, or around 235% of GDP in 2024. We know that debt levels continue to rise in both advanced economies and emerging market economies as well. Governments are struggling to find ways to rein in their fiscal deficits. Rates have risen from multi-decade lows. As we know in 2022, debt servicing costs are higher, spending pressures have increased, and we can talk about that for structural reasons. Obviously, aging demographics don't help as well. And then I want to bring you statistics specifically on the US, because we have many speakers from the US today on on the panel, the global risk report from the World Economic Forum highlights that the US fiscal deficit is projected to rise from 5.6% in 2025 to 5.9% this year and 2026 6% in 2027, which means the debt to GDP ratio is going to rise from 100% today to 120% in 2035. That exceeds the previous high of 106% set in 1946. So the trajectory is upwards, right? But also it's I mean, it's not just the US. We've seen episodes, especially in the last couple of days, of rising bond yields. Japan is a case in point. You know, we got to 4% there. And so investors are really focused on this. So we're going to have a discussion about where we are right now in terms of the global system, how much of a concern it is, what concessions and difficult decisions governments may have to make in an environment of strong fiscal pressures and keeping firepower, of course, for the next crisis, in addition to how institutional investors are thinking about it. So let me introduce our panelists. His Excellency, Minister of Finance and Revenue of Pakistan, Muhammad Aurangzeb. To his left, Jenny Johnson, CEO of Franklin Templeton, Ron O'hanley, chairman and CEO of State Street. And Anne Walsh, managing partner and CIO of Guggenheim Partners. Good to have you all with us. Minister, I'm going to start with you. Maybe let's take it back to where I started, which is the fact that there is a lot of pressure on, on governments these days, both to rein in the deficit, but also to spend especially, you know, here in advanced economies. Again, so much of the spending narrative is around defense spending, infrastructure, perhaps at the expense of other parts of the budget. But how do you square up both of those incentives to keep your keep your budget constrained, but at the same time adopt a more fiscal pro-growth stance?
Yeah. So so thank you. I think I'll just take more emerging market perspective. And certainly in the context of Pakistan, and being a former banker, I will also say debt is not a bad word. It's a question of how the debt is going to be used. If we take on debt and it goes into consumption versus debt, which for countries like us goes into investment, which produces exportable surplus, then I think it's the right thing to do. Having said that, in emerging markets we do not have the luxury of having reserve currencies. We cannot print our way out of the whole discussion. So whatever we do, whether it's on the debt side or on the FDI side, it has to be market efficient, which means it comes in and we can take on more debt. But everything that we, take on has to be seen in the context of exportable surplus so we can repay it. Right. If you bring in debt and it's all in terms of projects, which are in our case, rupee denominated. Well, then we run an FX risk. We, and that's where we. So there is a currency mismatch discussion, and there is a consumption versus investment discussion. And the last thing I would just say is we talk about, you know, emerging market debt, etc.. The question is, how did we get here to start with. Right. And from my perspective, it starts with fiscal discipline, right. If your revenues and expenditures are matching, well, then the requirement for borrowing and whatever you do and how you phase it out remains to be seen. So it's less about the debt. And we can say, you know, debt is unsustainable, but how did we get to that unsustainable space? It's all about fiscal discipline, and especially in emerging markets, especially in the case of Pakistan, we don't have a choice but to maintain fiscal discipline. And therefore, you know, we brought our debt to GDP ratio down from 75 to 70%. And in the last year we have had primary surplus, we have fiscal surplus. And I do think that's how responsible governments have to behave as we go forward.
Yeah. I'm just going to ask you a follow up question, since you mentioned, you know, not not all debt is bad. Ray Dalio, Ray Dalio has written a lot about about debt. And and his latest book he explains that in the early stage of a debt cycle, debt fuels growth. But as it expands and outpaces growth it actually creates fragility in the system. So given now we're in an environment where debt is being rolled over at even higher interest rates than before, than a couple of years ago, are we at the point where that is actually constraining growth as opposed to boosting growth?
Yeah, I think to a certain extent, we are now actually on the right side of the rate cycle. The rates are actually coming down. And of course, the panelists here will talk about the, the US situation and the overall the European situation. But in again, in the context of emerging markets, but certainly in the case of Pakistan, because we over the last two, two and a half years, you know, our inflation peaked at 38%. It's now into single digits. Our policy rate was a little over 22% is now 10.5%. So we are actually on the right side of the rate cycle. And therefore we have been able to, bring the the overall debt down. We have to be on the domestic side. We have created alpha, we have done liability management trades. We have, done, debt buyback. All of that is helping us on the on the domestic side. And quite frankly, we are now going back into the commercial market, for the first time, we are going to do a inaugural Panda Bond by the end of this month. And it's all in the context of sustainable finance. I know this these days, climate financing and green financing is slightly different from where we were. But as a country, we are, again, one of the most vulnerable climate financing countries. So this is going to be a green bond, which is going to help us. And therefore I'm going to say that, you know, debt in itself is not bad. It's a question of what you do, how you do it, and what purpose you use it for.
Well, Jenny, you bring a wealth of experience to the table. And in terms of investing in fixed income, has the way you assess credit risk changed over the course of the last decade?
I'm not sure the the way. Well, obviously you've added a huge amount of private credit to the market. So in some cases, that's why I think you're actually going to start to see investment teams have more of a convergence of traditional fixed income and private credit, because let's say you're a high yield manager and you have no insights into what's going on in the private markets. It's like you're managing money with half the information. So I think that part has changed. But there's just fundamental things about debt, that that, you know, features of the risk and debt that I don't think has changed. And I agree with His Excellency on the point, which I think is is probably one of the most salient points here, which is all this debt that we've taken on post GFC post Covid has gone to really much more consumption. And that's fine when you have something like a pandemic, but it's not okay when things are booming. And so if it's not being reinvested, which particularly in the case of the US, but most of the G7 countries, if it's not being reinvested in things like infrastructure and human capital. So education and if you measure, you know, how are we doing on education? I think most of the OECD countries, they just came out with a report that had math scores dropping by 15 points, reading scores dropping by ten. That's three times worse than any other time. So now we're moving into a time with all this technological advances that we know are going to change people's jobs, and we're not focused on investing in human capital, which will give you some return, because to your point, you know, it's fine if you invest as long as it's growth. But if you invest in consumption, you haven't generated anything to pay for that. And then just one other thing, 40% in, it's like 37% in emerging markets, but 40% of government debts turning over in the next three years. There's not a lot of places where rates are going down. And as you mentioned, Japan, I mean, that 30 year bond was 2.2 a year ago. Yeah, right. So, now you're going it's going to get much more expensive to even cover the debt that we have, and we're still adding it. So we got to change our mindset into using it for investment.
Ron, do you think we're getting close to a tipping point in terms of global debt levels? And obviously they keep going up, but they can't keep going up forever without any consequences.
Yeah I mean it's that's the question that everybody is asking. Is it a tipping point. And if you are building on a couple of things that Jenny said, I mean, what are the factors that decide that determine whether or not you're at a tipping point? One is growth, right? Is there can we basically outgrow it? Two is interest rates the direction of the interest rates. And then three is how much debt is needs to be issued. There's for the US there's the whole issue around. Will it maintain its reserve currency status and will it maintain it in a way that just gives it a preferred borrower status. So there's a lot of, there's a lot of kind of variables to answer that question. I would say this, unlike emerging markets and I'm generalizing here, emerging markets, if you think about their performance in debt, they went through their crises and were much more disciplined through Covid, in terms of what kind of new debt they were taking on, which let's be real, we had to do that, but it was to finance consumption. I think in retrospect, it's fair to say now that the US certainly did too much. And, you know, at least, what do they call it then? The big bazooka, probably at least one bazooka shot, if not two too much. Yeah. And we're in this cycle now, where we've got this technology that we all love and we're looking to put out there. We have to finance $1 trillion just in 2026. Yeah. So it feels like we're approaching, at least if it's not a tipping point, it's a time of crisis because rates aren't, rates are coming down but probably aren't going to come down enough. QE is in a funny cycle now, right? It's really coming off, not on. And so when you put that kind of cocktail together, will the big question will be will growth be able to basically outpace it.
Yeah. And I see you're nodding your head. You seem to agree with with with what Ron is saying. Do you think we're getting closer to that point in the US? I mean, to go back to what he was saying, maybe the second bazooka was too big, but there haven't been that many consequences on the United States.
Well, you know, we have a unique advantage in the US, and that is to have the reserve currency and being able to print dollars, extensively. And also having had what we might put in air quotes as financial repression, the idea of quantitative easing having run for so long and, dare we say, too long, particularly post Covid, you know, kind of going back to what His Excellency said, which is how did we get here? We we spent probably around $6 trillion, in during Covid and post Covid. And but what's really interesting about that is how if you really look at the household credit levels, they actually declined. So we and businesses, we actually transferred a huge amount of private debt to the public sector. And so, the question is, was that contributing to growth probably stabilized the economy. It insulated the economy. But I do believe and I agree, it was too much. And, and so there was only so much of that you can, can sustain the other element to and this is sort of interesting is I tend to look not just at the amount of outstanding debt. And that's not just in the US, but it's also a global problem. But also how much can be dealt with per year, as Ron was alluding to. And that is the deficit spending at $2 trillion of deficit spending per year. That's a lot to have to finance. And, back to the point, we haven't seen not just the levels of debt, but that deficit spending absent a recession, at full employment and a and a, dare I say, a very strong economy. This is unprecedented. There came into vogue during this period of time the concept of modern monetary theory, which, by the way, I don't agree with. I came up of age when you were actually supposed to pay back what you owed. And, and Modern Monetary Theory suggests that you don't you just keep rolling that obligation and to the point that rates are now coming back down. Now, they haven't gotten down to where they were pre-COVID. Because we don't have that level of of support again, that financial repression model in place. But as long as you can just keep rolling those payments, you can keep this going and it's sustainable until it's not. And what would be a not event would be what happens in the in the event of very substantial geopolitical events, a war, a major recession, economic crisis, and more than just an isolated incident of it in a geography or a location. And and so I think what really is the point that Ray Dalio makes about it's fragile is you're very at risk. Should there be something that could happen in the not too distant future that could upset that. You know, rather rather, much on the precipice balance that we sit in?
Yeah. Let me just ask you, because the US obviously benefits from being the world's reserve currency. And if you look at the performance of global fixed income markets last year, I mean, after Liberation Day, the knee jerk reaction was to sell stocks, the USD and bonds. But actually stocks recovered as we know, bonds recovered. And you actually ended the year ten year US treasuries ended the year lower than where they started. The dollar didn't recover. But I do wonder whether at some point, if yields around the world keep rising, like what you're seeing with Jgbs like what you're seeing in France, UK, whether that's going to have a knock on effect, do you think to the US, do you see that happening?
Oh, absolutely. Because you know what? We've moved from the question of fundamental levels of debt to the question of technical factors, which is somebody has to buy that debt when it's issued and when there become other opportunities. I mean, as long as jgbs were yielding basically nothing. And on a hedged basis, it made sense for the Japanese investor to move into the US markets. You know, we could sustain this, this purchase appetite from around the globe. Now it becomes a lot more competitive. And so for that investor dollar, wherever that's coming from, they're going to be able to look across a number of different debt alternatives in various bond markets and make selections accordingly. And so as a result, you know, we've seen this uplift in rates, you know, pretty much across the board, particularly as as Jgbs have have risen in yield. Yeah. And and by the way, with that comes also risk to banking systems. Somebody owns that debt that's now trading at a substantial discount. And and that that's a problem that we saw in 2022 suddenly, and caused a ripple through which the fed came in and helped repair. But it caused a ripple through the banking system, particularly with regional banks in the US. So there is a risk from that price movement especially, especially one that's so sudden and and shock worthy.
As we saw with Silicon Valley Bank.
Exactly.
Well, I was going to say, we talk about rising debt levels, and that's one side of the equation. The other side of the equation is demand for for all this debt. Who is who is actually going to buy this debt. And yesterday the big headline in the market was that the Danish pension fund was no longer going to buy US treasuries. Fine. It's small. Treasury Secretary Scott Bessent did say that. But but the more these types of announcements get made, what is your level of concern about who exactly is going to be buying these U.S. treasuries?
Well, and I think our largest foreign owner of US treasuries is Japan. And now their rates are going up. So it gets to your point. It gets more competitive on it. Look I you know, I think that the that since April 24th we've raised or we dropped rates 175 basis points in US, but ten year is higher, right? So in the end you have to attract buyers. And I do think we will be able to attract buyers to US Treasury. The question is at what price and therefore at what price. What does it squeeze out as far as other investment opportunities. And I think that's the big risk. I actually think you'll find buyers. It's just there may be and then eventually you you can't support it. But I think the first thing you start to see is a steepening yield curve. And because you have to attract those buyers.
Yeah. Ron, let me also just bring up, what the ladies were saying about, preparedness for the next downturn. Right now, the US economy seems to be doing fine. That won't always be the case. I mean, this has been a very, very long cycle, but at some point the cycle will turn. What impact do you think that is going to have on on long term yields as opposed to short term, which obviously is is privy to what the central bank is doing?
Yeah. I mean, part of what you've seen with, with the yield curve, shaping that Jenny's talking about is, you know, we didn't have a yield curve for a long time. Yeah, that was part of the whole financial repression. So it didn't matter where you were. It kind of all looked the same. You know, we should have been issuing a lot of 30 year debt back then, and didn't, and, so that we're in a funny spot now the US is in a funny spot. I'm talking about sovereign. Now, we are not talking yet about households and and corporations, which are actually in relatively good spot, certainly, than when they have been in the past. If you go back to the GFC. But the the challenge that we have now is that, at the time when it would have been very cheap to have done 30 or maybe even 50 year bonds if we'd wanted to. We didn't. Because everybody was trying to manage it to the lowest number possible, the interest payments, the lowest number possible. And now we're in this spot where there is a real danger of squeeze, and it gets back to then fiscal policy. Right now, a lot of the fiscal policy, I mean, you can call it what you want. It's it is putting more money into consumers pockets, and that's good. And there's a segment of, of the population that really needs that money, but that's going to be around consumption. And if you think about the long term investments that need to be made, some of it will be done by private capital. But private capital is not going to fund a battleship or, you know, not going to fund the Golden Dome if whatever you think the government needs to do that needs to be somehow either through taxes or debt. And that's I think, what the real danger is here is either interest rates don't continue to fall or start to rise. That's going to be it's this whole crowding out problem.
Yeah. Let me ask you the, the WAF put out an economist report suggesting that for most governments, their method of dealing with high levels of debt is inflation. So essentially do nothing. I mean, just, you know, hope that that they can inflate the debt away. How how prevalent do you think that strategy is? And number two, how successful do you think that strategy can be for emerging market economies?
No, I.
Am not sure that part is sustainable. Whether printing it away or through inflation. We can get it going. I mean, I can again say for emerging market perspective in general, coming back to my own country in particular, there are two aspects where debt becomes especially public debt. Discussion becomes very important. One is fiscal discipline or indiscipline. The way it crowds out the private sector lending. And I do think that's very important, especially in those countries where the emerging markets are very clear that the private sector has to lead the country, and therefore the access to finance, is very important comes back to the the fiscal deficit and the fiscal discipline that the government shows, because for the banking, participants in general, capital markets in particular is sort of risk free lending. You give it to the sovereign, even though we might be rated wherever we are rated. But technically on ground, domestic debt is risk free. So so we have to be very clear and careful that we don't really diminish the private sector lending and crowd it out. That's one part of it, the second part of it. In the emerging markets, there are a number of emerging markets, including ourselves, which I mentioned are essentially, in the top climate, vulnerable countries, not necessarily because of emissions, but essentially in terms of adaptation finance. And that's where, you know, I'll give you a concrete example. In 2022, we had a devastating flood in Pakistan, and in last year we again had a huge flood in Pakistan. So it's the frequency is increasing, the intensity is increasing. So climate change for us is real. I mean, it's not an academic discussion. It has a real impact on GDP growth. It has a real impact on our resources. The fact that we were able to build fiscal buffers over the last 2 to 3 years is that in 25, so 3 or 4 years back, three years back, we went into an international appeal right away to the UN agencies, etc. in terms of rescue and relief. Last year, the Prime Minister and the cabinet decided we have enough fiscal space available. We are going to fund it ourselves. So I say it in the context, that this debt discussion becomes very critical for emerging markets in general in terms of crowding out the private sector and the exogenous shocks and the exogenous shocks for us is not only whatever is happening in the geopolitical space. For us, climate change is real, and therefore building the fiscal buffers and bringing in the fiscal discipline and therefore keeping our debt levels at the right level is extremely critical.
Can I pick up on that? Because, back in the West, when we used to talk about climate finance and public private partnerships, it was all about, mitigation, new technologies and things like that. Adaptation, finance. There's no private solution to this. You're not going to you're not going to sell bonds to you're not going to get the private sector to build a seawall. And if you think about adaptation finance, it's the global South that's facing it first, but we're all going to face it. So if you think about new demands for public spending, it will be around adaptation finance, whether it's seawalls, whatever it is. Right. There's going to need to be investments made. And so as we think about this problem, it's not just about now, but it's in the future as sea levels rise, etc..
But doesn't that entail a build up of private debt as well. So.
Well but yeah but but the the financing for that will all of it will be sovereign.
Yeah.
Sorry I don't want to get into a sort of a bilateral.
Discussion.
But I think it's a very important point. Because the reality is on the other side, the likes of, with due respect, the green climate funds, and, you know, a fund which was created in Sharm el-Sheikh and has still not been operationalized. It's, you know, in our own countries, we have huge bureaucracies. These are one of the largest bureaucracies in the world, even to get accredited into these institutions, even before we can talk about funding and what the the, you know, the OECD world should fund or not before we can get into this. So I think in some way, the public private partnership and somewhere the capital markets will have to play a role because these bureaucracies are not the answer in terms of our mitigation discussion.
Well, the returns aren't competitive without the first loss position going.
Exactly, exactly.
The government or some entity.
Yeah. And I want to take you down a slightly different tact, which is, the tension between fiscal policy and monetary policy. And obviously, you know, the US is a good example of that right now, servicing very, very large, very large debt pile, very big deficits. The president has very openly expressed his desire to see low interest rates. At what point do you think investors have to account for a question mark over policy making and true central bank independence?
Well, so this is a multi-layered question and answer. So, let me see if I can contextualize monetary policy. A lot of people think in terms of rates. And it seems like President Trump speaks a lot about the fed funds rate. But the truth is, is that the fed has us. Fed has two tools. They're fighting, by the way, a two pronged mandate, which is inflation risk as well as stable employment. So stable employment, stable prices. They have two major tools in the toolkit. And the first is rates. And that's the one people think about the most. But there's also the balance sheet and and reserve management, reserves management. And so right now that balance sheet is running about $6.5 trillion. If we go back to Covid, before Covid started, the balance sheet was 4.5 trillion. So when all the way up to 9.5 trillion has come back down. So they've really managed that balance sheet. And one of the aspects that's concerning to the administration, too, of course, is and it's the fact that treasuries are a reference price for so many other markets, in particular, mortgages, mortgage loans. Exactly. And so that's why the Trump administration has now made the mandate to the GSEs to purchase mortgages. Again. At one point in time, they actually did have a buyback program, which was about 25% of all mortgages created, was actually purchased under the balance sheet. It's down to about 1% or 2% now. So based on relative history, they have room to increase that. But by the way, the balance sheet increased buying other investments as well. So it's not like it's a free lunch. And so as a result I think that the fed whoever ends up being a appointed to the position.
We know it's a man.
We found out we know that's a that's right. President Trump said that today. It is it is a male. So, but, he referred to him as he, but but but they're going to be they're going to inherit a, a a real challenge how to balance the tools and the mandates. Yeah. And, and I also remind individuals that they're not a fully independent body. They are, they are responsive to and and managed by Congress. And they do have congressional oversight. So there is still politician involvement at some level. But at this point in time, what we're really looking for as investors is central bank independence from the executive branch. And I think that's what everybody hopes to achieve, regardless of who the next fed chair is. I think that they are this is a multi-layered job because it's not just rates or the balance sheet. It's also the regulatory environment for the banking institutions and the market. So, so, I'm my my hope is, is that we do continue to see independence. I do believe that we will. But the problem exists that treasuries and how they work with the Treasury to figure out where Treasury issuance is along that yield curve, because that is extremely important for other markets, and I'm not going to take up all the time. But but that will have a big impact on other big issuance, which is coming like data center finance. So you talk about growth in order for growth to be, generated, I can see a huge amount of debt financing that will be coming in the next couple of years to do that as well.
I'm going to pick up on that in just a moment. Jenny, do you have anything to say about this hot button topic of of fed independence? Do you think we're overplaying it in the media?
No.
I mean.
Look, I think President Trump makes his position very clear. And I think the good news is that the the fed chair is the position is somewhat protected and and independent. I do think that that unfortunately, the the DOJ's move on Powell has sort of I'm not sure it was so much focused on him as much as the next guy to say, once you're in there, maybe you're not quite as independent. But I think the markets will react very strongly if there is any, interference. That's right. It's one thing to have rhetoric and say how you feel. Right? And I think that's what President Trump does. He feels that rates should be lower. It's another thing to really act on it. I think the market wants an independent fed chair, and I think that anybody in that position, ultimately has a legacy that goes beyond, you know, President Trump's term. And they're going to think about that, as we all do. And so I think that factors in as well.
Ron, I want to bring you back to what what Ann was just saying about the sheer amount of, of, borrowing that we're going to see mainly to, to finance CapEx spending into artificial intelligence. And I think people are beginning to ask questions about whether or not this is actually going to pay off, and you will get a return on investment. You saw it in the case of one very large American corporate, you know, their credit spreads widened significantly after they announced a massive funding deal to finance all of their, AI investments. So from from a credit perspective, how much of a concern is that, do you think eventually becoming a systemic risk?
Yeah, I think it goes a little bit back to the crowding out point that we've been talking about here in the beginning of this AI data center cycle. We all thought it was going to be fine because the hyperscalers were basically paying a really they were funding it off their income statement. That's not happening anymore. I mean, it's it's about $1 trillion of new issuance for this year. The estimate is 800 of that will be, private, 200 of that will be in the public markets. So that's just a lot of debt to be out there. But I do think you two would know this better than me. What I, I do think the public and the private markets are working pretty well together on this. I mean, there was the was it the meta deal where it started out? Basically Pimco took down a lot of it, and then it went out into the public markets. So I think you'll see all that kind of thing happening. But again, we know there's a finite number. We just don't know how close we are to it.
Well, one other thing about corporate debt. So interestingly, you know, it's increased a lot. We've also seen we all know not as many companies are going public. The the private equity has grown dramatically. When you have private equity, often you go to private credit or some sort of credit to to fund it. But when you do that, a lot of times it's not an investment in something. It's actually it's not like a corporate investment. It's just buying a company that you maybe you restructure some things and then and then go public. But, but or what a lot of it's done is selling it to each other. Right. That's been the history. So that's been a little bit of unproductive corporate debt. At least with the hyperscalers, you can argue that it is more productive debt. And then my only thing when people ask me about the data centers, I just go with technology. I always get nervous when we're certain that whatever today's technology is going to be in place for the next 30 years. And I remember having this conversation with the CEO of Bank. We were just debating on the data center thing, and I said that, you know, I just never know about technology. We walk into a cocktail party. The first guy we talked to says, oh, I'm running quantum computing. And I said, oh, quantum computing. Is that really how soon is it? Well, ten years. I said, yeah, but what about all the energy? And he goes, no, we're using photonics silicon now. I have no idea what photonics silicon will ever do, but I do think that there will be the one thing that certainty around the 30 year energy needs, I think, underestimates. Perhaps the technology advances that will happen in that time to reduce the consumption of energy to get the same output.
Yeah, I, I actually believe that too. But nonetheless, you're still left with all the debt that was issued for technology that's now obsolete.
That makes you nervous.
Yeah. Yeah, yeah.
And you know, the backdrop for it for credit has been actually pretty benign. And I just wonder again, you know, with all the new debt that's coming to the market, how long do you think, how long do you think that's gonna persist for this benign credit environment where, defaults have actually been relatively low? And whether as an investor, maybe you'll have to start focusing more on downgrade risk as opposed to outright defaults or.
Well, let's go full circle to some earlier points. With regard to how do you grow yourself out of too much debt? Is growth, right? I mean, how do you how do you move beyond it? Well, and and so we've seen pretty good growth in the US. We've seen good corporate stories, whether it's, you know, margins, profits, revenues. The business environment over the last number of years has been good. And of course, as we moved all that debt off of the private, out of private, from private obligors to government post Covid, that that sort of cleansed all of their balance sheets and sort of gave them an opportunity to start somewhat fresh. What we have seen over the last number of years is issuance is down. You've seen a lot of recycling of existing debt, but you didn't see a lot of new debt. And so I think where the concern comes in with the data centers suddenly is this is a new level of debt that hadn't been in the markets. And what we're seeing is a we're starting off this year, in fact, with a very significant amount of debt coming into the market and plans for more of it. And I think that's what's got market participants a little bit nervous. So we've as a result, over the last few years, we've seen spreads continue to tighten and and and the risk, you know, belief that the risk is is much less has really entered the market as a paradigm, including at the lowest rated credits, even though we've seen a structural shift in credit to downgrade. So we've seen single B's move to Triple C's. We've seen Double B's move, particularly, in bank loans and and in private credit. So the risk has risen. But the financing and capital have been there because there wasn't so much more debt to be, to be, found in new homes, new homes or new hands. That's what's the shift. I think that's what's got the market nervous to see if that's going to have a negative impact. I will add one more statistic and that is infrastructure. Globally we need to finance $6 trillion of infrastructure per year over the next five years. Just to get a just to keep on top of what. And that's digital infrastructure. It's transportation, it's logistics. It's everything globally. And the build out. And as we move into the sort of multi-polar world and we see a lot more reshoring and onshoring by many countries, not just the U.S. that has to be financed. So, that will add another layer. I expect spreads to widen. I expect there to be risk premium that enters back into the fixed income market in a way that it had been evaporated over time.
If you have a minute, can I?
Absolutely. I was going to come to you now anyway.
So so it's just a question of new debt and how it sort of works out and where it goes. So, in December we have just closed, the single largest, syndicated finance in the history of our country. It's, roughly about $3.6 billion. It's been led by IFC and US Exim is in there and all of that. And this is to finance essentially a copper mine. And that copper mine will come into production in 28. In the first year of production, the commercial output and export is going to be roughly $2.8 billion, which is roughly 10% of our current export base. And this is just a start. And and that's why I said, where do you get the debt and how are you going to finance it and where it goes? Because for us, this is the start of the whole discussion. And we are going to if we need to get more debt because the belt in, in one part of our country, from our perspective, is the supply side response in terms of the copper shortage and in terms of energy transition, in terms of EV transition, which is inevitable in the world. So it's a question of where you get the debt, how that debt is used. And, so that's where I started off from. The debt in itself is not bad. It's a question of how we use it.
Yeah, okay. With that. We've got a few minutes for questions in case. Okay. We've got a question over there. Yeah.
Hello, everyone. Thank you for an amazing session. I have the question for our honorable finance minister. So we've been I'm going to take a more microeconomic aspect to it. You know, we've been doing macroeconomics. So, we see that, you know, one of our neighbors have done incredibly well in technology fundings that they've been raising for a while. And I'm not talking about China. I'm talking about India. Right. Last year they did $10.5 billion in external funding. Quite on the contrary, we in Pakistan have been doing 30 to $35 million a year for the past 2 to 3 years. Do you think instead, if we look instead, if we, you know, if we ignore the playbooks of the West and start looking at more bilateral ties such that our entrepreneurs, our entrepreneurs can, you know, meet more often together, sit together, understand the dynamics, because we both go through the same dynamics. Do you think that collaboration at a more ground level between entrepreneurs of the two nations, would that benefit the economy overall, and would that improve the state that we're in currently in terms of fundings that we get in our part of the world?
Well, I think, of course we should always work together. And, you know, there's no no two questions about it with with everyone, you know, who is part of what I call the new economy, right? We talk about the old economy. The new economy is Web3, blockchain, crypto and everything else which is associated with that. And as you know, we are blessed to have, the top five freelancer population in the world. Today, our young men and women are coding at 12 to $14. And we have a fantastic American Pakistani entrepreneur who has given donation to set up a blockchain center of excellence in one of the key universities in Pakistan. If we upscale rescale our youth, they can start coding from anywhere between 50 to $60 to $250. Fantastic for them, great for the country. So I don't think it's a funding discussion. It's a question of how, we prioritize the new economy. And from my perspective, the new economy is very much in the IT space and in the minerals and mining space for for Pakistan and in the IT space. You know, we have moved in the right direction. In December, we hit $437 million of IT services export, which is going to be roughly $5 billion if we do it. Straight line, huge potential. Long way to go. I genuinely believe we talk about funding. We talk about debt. And I'm again saying it from an emerging markets perspective. For us, funding will be available. So to your point, in terms of, you know, mitigation, finance, etc., we have gotten into with Ajay Banga Country Partnership Framework for ten years. And we'll have $20 billion available to us over the course of next. It's really a question of capacity and capacity building in our own countries. So quite frankly, the ball is in our court. It's not funding, it's not debt. How we steer it and how we take it forward.
Okay, one more question. It's got to be snappy, though. Anyone else? No. Okay. Very helpful. Panelists. Thank you so much. This is a wonderful discussion. We really went around the world and covered a lot of topics, and we literally, quite literally circled back to where we started. So thank you so much. And thank you for to the viewers for watching this.