Government debt across developed economies is set to climb to a record $75.8 trillion by the end of 2026 as countries struggle with persistent ​budget deficits, geopolitical tensions and rising spending demands, Fitch Ratings said on ‌Tuesday.

The ratings agency said debt in developed markets would increase by $4.2 trillion this year alone, taking the total to the equivalent of 104% of gross domestic product, up sharply from $26 trillion, or ​68% of GDP, two decades ago.

Fitch expects the 10 largest developed economies ​to account for $69 trillion of that total, equivalent to 114.5% of GDP, ⁠highlighting the outsized role of the United States and several other large borrowers ​in driving global debt accumulation.

The agency forecast the U.S. would record the largest government budget ​deficit among major developed economies this year at 7.8% of GDP, or roughly $2.5 trillion. France is expected to post a deficit of 5% of GDP, followed by Britain at 4.8%, Germany at ​3.7% and Japan at 3.1%.

It warned a series of shocks, including the global financial ​crisis, the euro zone debt crisis, the COVID-19 pandemic, Russia’s invasion of Ukraine and the ongoing ‌U.S.-Iran ⁠conflict, had all contributed to a long-term ratcheting up of debt.

Governments are also facing growing structural spending pressures linked to defence, ageing populations, climate change adaptation and higher interest costs. Fitch estimated European defence spending could rise by an average 0.6% of GDP ​between 2025 and ​2029.

Higher debt levels are ⁠also increasing market risks. Although 10-year government bond yields in major markets have eased slightly since peaking during the U.S.-Iran conflict, ​they remain about 51 basis points above pre-war levels.

Looking further ​ahead, the ⁠U.S. debt-to-GDP ratio is projected to climb to 131.5% by 2030 from around 120% in 2026, while Japan’s ratio is forecast to dip slightly, although it will remain the highest ⁠in ​the group at nearly 192%.

Artificial intelligence could boost growth ​and improve debt sustainability, especially in the U.S., Fitch said. 

However, it could also lead to higher ​unemployment and social outlays and also lower tax revenues.