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The surge in public borrowing has several important effects, exposing governments to higher interest rates as well as constraining their options at a time when economists would like extra fiscal stimulus from some countries.

“Higher borrowing costs could raise concerns about debt sustainability,” warned the IIF. “With the focus in 2017 likely to be on prospects for fiscal stimulus, already-high levels of mature market debt may act as a constraint.”. Borrowers in Britain have been working hard to pay down their debts, slashing the total debt to GDP ratio by 65 percentage points between 2011 and 2015. That is now in reverse, as the government keeps borrowing and banks stop deleveraging – in the first nine months of the year, debts rose by 15 percentage points to more than 465pc of GDP. Governments in emerging markets have increased their debt more slowly – debt to GDP increased by only two percentage points. Those nations could be particularly hit by higher interest rates in the US, however, as investors looking for yield in riskier markets may be tempted back to the States, as they were in the so-called taper tantrum of 2012.  The biggest emerging market borrower in 2016 was China – it accounted for $710bn of the total $855bn of bond issuance from the governments.

The country’s households were also keen borrowers in the nine-month period. Individuals took on loans amounting to an additional 3pc of GDP, while overall emerging market household debt hit a new high of 35pc of GDP.
“This suggests that for some households, debt service capacity could be challenged in a rising interest rate environment,” the IIF warned.