Debt is usually described as an anomaly. Government debt becomes a concern when it crosses certain thresholds, corporate debt when it threatens solvency, household debt when repayments absorb an excessive share of income. Each problem appears to belong to its own universe. Yet across the contemporary economy, these debts are not three separate phenomena. They are different components of the same system.

In 2024, according to the International Monetary Fund’s Global Debt Monitor, global debt stood at just over 235% of world GDP, reaching approximately $251 trillion. Public debt represented slightly less than 93% of global GDP, while private debt — primarily that of companies and households — stood at just under 143%.

These figures are striking because of their scale. But their real significance lies elsewhere. They reveal an economy in which a considerable share of present activity depends on the ability to mobilise today income that will only be generated tomorrow.

Debt is therefore no longer merely a means of financing the economy. It has become part of its infrastructure.

Moving Time

Borrowing fundamentally means moving a constraint through time.

A household can purchase today a home that might otherwise require decades of prior saving. A company can build a factory before generating the profits necessary to finance the investment. A government can construct infrastructure whose cost will gradually be borne by future taxpayers.

Credit therefore transforms future income into present capacity for action.

This is precisely what gives it its economic power. Without debt, much investment would have to be preceded by an accumulation of savings. Projects would develop more slowly, companies would have fewer opportunities to expand, and access to certain assets — particularly housing — would be considerably more restricted.

The modern financial system has reduced this constraint by organising the circulation of savings between those who temporarily hold capital and those who wish to use it.

But this mechanism has a fundamental consequence: it makes the present dependent on the future.

Every debt assumes that sufficient income will be generated tomorrow to repay it. Credit is therefore always, implicitly, a bet on future growth, income, profits or tax revenues.

When this anticipation becomes generalised, the entire economy begins to operate on promises.

Three Debtors, One System

Public debt, corporate debt and household debt are often studied separately. In financial reality, they are deeply intertwined.

Households deposit their savings with banks, investment funds, insurance companies and pension schemes. These institutions use part of those resources to finance companies, purchase government bonds or extend credit.

Companies borrow to invest, produce and pay their employees. Those wages allow households to consume, save and repay their own debts.

Governments collect taxes from these incomes and activities, but they also borrow from financial markets. The securities they issue are themselves held by banks, insurers, pension funds, asset managers and, in some cases, households directly.

One actor’s debt therefore becomes another actor’s asset.

This changes the way indebtedness should be understood. Abruptly eliminating a debt does not simply release a debtor from an obligation. It may also destroy an asset held by another participant in the economy.

The system is therefore built less around a simple opposition between creditors and debtors than around a vast architecture of interconnected balance sheets.

The State as a Permanent Borrower

Sovereign debt occupies a particular position within this architecture.

Historically, governments borrowed extensively to finance extraordinary circumstances: wars, major infrastructure projects or crises. In contemporary economies, public borrowing has become much more permanent.

Governments routinely refinance maturing obligations by issuing new securities. In many countries, the objective is therefore not to repay public debt entirely but to maintain its sustainability: preserving the ability to pay interest, refinance maturities and retain investor confidence.

This logic works as long as several balances hold simultaneously.

Growth must generate sufficient income. Tax revenues must remain compatible with public expenditure. Investors must continue to accept government debt. And financing costs must not rise to the point where servicing that debt becomes unsustainable.

Interest rates are decisive in this equation. A highly indebted economy can function relatively comfortably when borrowing costs remain low. The same stock of debt becomes considerably heavier when rates rise.

This is why central-bank decisions extend far beyond inflation. They also alter the price at which the entire system can continue to carry its debt.

Companies Between Leverage and Vulnerability

For companies, debt serves another purpose: acceleration.

A business capable of generating returns above its financing costs can use debt as leverage. It can invest beyond what its own equity would permit and potentially increase returns for shareholders.

A significant part of modern capitalism operates according to this principle.

But leverage works in both directions.

When revenues increase, debt amplifies investment capacity. When revenues decline, repayments remain. A factory may operate below capacity; a bank instalment does not automatically adjust to its utilisation rate.

Highly leveraged companies therefore become particularly sensitive to economic downturns, higher interest rates and margin compression.

Debt makes it possible to accelerate growth. It also reduces the margin for error.

Households and the Anticipation of Income

For households, the mechanism is more familiar, but the underlying logic is exactly the same.

A mortgage makes it possible to acquire a home in exchange for twenty or thirty years of future income. Car financing transforms several years of potential savings into immediate purchasing power. Consumer credit pushes the logic further by financing present expenditure directly against future earnings.

This possibility has profoundly transformed contemporary societies.

It has broadened access to certain goods while also turning future income into a financial resource available in the present.

Part of a household’s standard of living therefore depends not only on current income. It also depends on borrowing capacity.

The distinction matters.

Two households with identical incomes may sustain very different levels of consumption depending on their access to credit. Conversely, rising interest rates or tighter lending standards can sharply reduce demand before nominal incomes have even fallen.

Credit does not merely accompany consumption. It helps create it.

Morocco Within This Architecture

Morocco provides an instructive illustration of this interdependence.

Its economy remains strongly structured around bank intermediation. The state finances part of its requirements through borrowing, companies rely extensively on bank credit, and households use financing particularly for housing and consumption.

According to the 2024 Financial Stability Report published jointly by Bank Al-Maghrib and Morocco’s financial supervisory authorities, bank lending to non-financial companies reached MAD 634 billion, equivalent to 39.7% of GDP. Their non-performing loans stood at approximately MAD 70 billion, corresponding to a default rate of 11.1%. The same report projected Treasury debt at around 67% of GDP in 2025 before declining to 65.6% in 2026.

These figures reveal both sides of credit.

On the one hand, it finances economic activity. On the other, a proportion of loans will inevitably encounter repayment difficulties.

This is where a particularly revealing evolution of Morocco’s financial system emerges.

When Distressed Debt Becomes a Market of Its Own

When a borrower stops servicing a debt normally, the corresponding loan becomes non-performing. But it does not disappear.

It remains on the bank’s balance sheet.

Bank Al-Maghrib has noted that such exposures can remain there for extended periods, partly because of the time required for amicable or judicial recovery and the tax constraints surrounding their removal from bank balance sheets. They generate management costs, consume regulatory capital and weigh on institutions’ liquidity.

Morocco has therefore been working on the development of a secondary market for non-performing loans.

The idea represents an important shift.

Instead of requiring a bank to retain a distressed loan until its final resolution, the claim could be transferred to specialised investors. They would purchase it at a negotiated price reflecting expected recoveries, available collateral, judicial delays and the associated risks.

A claim with a face value of 100 is obviously no longer worth 100 when full repayment becomes uncertain. But neither is it necessarily worth zero.

Between those two values, a price emerges.

And once a price can be established, a market can emerge with it.

The framework presented by Bank Al-Maghrib notably seeks to remove some of the legal obstacles to the direct transferability of non-performing loans and to simplify the disposal process. For banks, the objective is clear: clean up balance sheets, release regulatory capital and recover liquidity that can potentially be redirected towards financing the economy.

Such a market also requires reliable information allowing investors to assess portfolios, an appropriate tax framework and sufficiently effective mechanisms for restructuring and recovery.

The initiative is not entirely new. The World Bank has previously documented its support for Moroccan reforms aimed at removing the fiscal, legal and institutional barriers to the emergence of a secondary NPL market.

A distinction nevertheless remains essential between establishing the framework for such a market and having a deep, liquid and mature market already operating at scale. The development of distressed-debt markets depends not only on legislation but also on data quality, valuation capacity, recovery procedures and the emergence of specialised investors.

Yet the principle itself is revealing.

Modern economies no longer build markets only to create and finance debt. They increasingly build markets to manage debt when it no longer performs as originally expected.

Managing Failure Rather Than Eliminating It

This development extends far beyond Morocco.

Markets for distressed assets exist in various forms across many economies. The International Finance Corporation regards their development as a mechanism through which banks can dispose of non-performing assets, restore lending capacity and, in some cases, facilitate the restructuring of borrowers that remain economically viable.

This illustrates a fundamental characteristic of sophisticated financial systems.

They do not operate on the assumption that every loan will be repaid.

They operate on their ability to absorb situations in which some will not be.

Loan-loss provisions, collateral, restructuring, insolvency proceedings, securitisation and secondary markets for distressed claims all form part of an architecture designed to distribute, transfer or absorb the risks generated by credit.

Financial sophistication does not eliminate failure.

It makes failure manageable.

The Debt Paradox

It would be tempting to conclude that the world economy is simply too indebted.

The reality is more complicated.

An economy without credit would probably be less vulnerable to debt-driven financial crises. It would also be far less capable of rapidly financing homes, companies, infrastructure and investment.

Debt simultaneously creates capacity and fragility.

That is its fundamental paradox.

The central issue is therefore not the existence of debt itself, but the relationship between the stock of debt and the future capacity to generate the income required to support it.

When credit finances investment that increases this capacity, debt can help produce the resources required for its own repayment.

When it persistently finances expenditure without a corresponding creation of income or productive assets, the mechanism becomes considerably more fragile.

Yet the boundary between the two is rarely perfectly visible at the moment the money is borrowed.

An Economy Built on the Future

Behind the hundreds of trillions of dollars of global debt lies a much simpler idea.

The contemporary economy continuously consumes part of its future.

Governments borrow against future tax revenues. Companies borrow against future profits. Households borrow against future salaries. Banks transform these promises into assets. Investors buy, sell and value them. And when some promises can no longer be fulfilled as expected, new mechanisms emerge to restructure them, transfer them or assign them a new price.

The development of a secondary market for non-performing loans in Morocco belongs to precisely this evolution. It is more than a technical reform of the banking sector. It illustrates how far the economic organisation of debt can extend: after financing the present through the future, the system must also determine what happens when that future does not produce exactly what had been anticipated.

Debt is therefore not merely a liability accumulated on the balance sheets of governments, companies and households.

It has become one of the mechanisms through which their economic destinies are connected.

And perhaps this is what an economy under debt ultimately reveals most clearly: we have not simply borrowed money. We have built part of our prosperity on the permanent ability to borrow time.

Main Sources

International Monetary Fund — Global Debt Monitor 2025, global data on public and private debt.

Bank Al-Maghrib, ACAPS and AMMC — Financial Stability Report 2024, Treasury debt, corporate lending and non-performing loans.

Bank Al-Maghrib — work and presentations concerning the development of a secondary market for non-performing loans in Morocco.

World Bank — monitoring of Moroccan reforms concerning the development of a secondary NPL market and the associated legal, fiscal and institutional barriers.

International Finance Corporation — research and programmes concerning distressed-asset markets and the Distressed Asset Recovery Program.