Global sovereign debt will climb past US$100 trillion in the year ahead, according to a forecast from Fitch Ratings. That would represent a rise of about US$7 trillion relative to year-end 2025. Much of the increase will be the result of government spending in the U.S. and China.

“A fairly high and rising debt burden in the sovereign world really means that the fiscal space is shrinking,” said Shelly Shetty, managing director, head of Americas and Asia sovereign ratings at Fitch Ratings. “It gives less capacity to respond to shocks, and obviously increases risk for adverse bond reaction to fiscal slippage or political shocks.”

The global median fiscal deficit is forecast to be about 3% of GDP this year — unchanged from what Fitch expects for 2025. The U.S. and China are forecast to run fiscal deficits of more than 7% of GDP this year.

“This is despite the fact that policy rates have been coming down,” she said. “At this point in time, there is generally broad aversion to increasing taxes. In fact, in the U.S., the One Big Beautiful Bill is delivering tax cuts. And on the spending side, there are long-term pressures coming from adverse demographics, climate commitments as well as defence spending. The political environment globally is also not very conducive for making structural spending reforms.”

Richard Francis, senior director, co-head of the Americas sovereign ratings at Fitch, said Canada should expect a federal deficit at or above 3% of GDP this fiscal year, at the general government level (including all three levels of government and other government entities providing core public services).

“The federal budget significantly increased capital expenditures,” he said. “We estimate that debt-to-GDP reached 92% last year. And we’re expecting a pretty large acceleration through the next few years.”