Near-term inflow: the US national debt has added almost $2 trillion amid the conflict in Iran

Against the background of the conflict in the Middle East, the US national debt increased by almost $2 trillion and exceeded $40.5 trillion for the first time at the end of October. One of the main reasons is a significant budget deficit, amounting to about 6% of GDP. Washington is forced to increase borrowing, while Japan, China and Russia are reducing investments in US government bonds. Rising debt service costs pose additional risks to the global economy. When the United States will hit the new debt ceiling and how stable the Russian national debt is against this background — in the Izvestia article.

Why is the American national debt growing?

The US national debt has updated its historical maximum: according to the US Treasury, on October 26, it exceeded $40.5 trillion for the first time. Statistics are published with a slight delay. The debt is formed through the issuance of government securities — Treasuries, which are comparable in purpose to Russian federal loan bonds (OFZ). Their issuer is the Treasury of the country.

More than $32.6 trillion is owed to external holders — citizens, organizations, banks and other countries that purchase American government bonds. Another $7.9 trillion is made up of domestic borrowings, that is, obligations to departments and state funds. Thus, in terms of each resident of the United States, there is approximately $116 thousand of government debt. Izvestia sent a request to the financial department.

Borrowing growth has accelerated in recent months. One of the key reasons is the significant federal budget deficit. In fiscal year 2026, U.S. treasury revenues totaled about $5.5 trillion, while expenditures reached $7.5 trillion. In other words, the government spent about $2 trillion more than it received. This corresponds to approximately 6% of the country's GDP, explained Oleg Abelev, head of the analytical department at the investment company Rikom-Trust. The fiscal year in the United States ended on September 30.

The additional burden on the budget is created by interest on the national debt. This year, the net cost of its maintenance exceeded $1 trillion for the first time, the expert explained. This is more than the entire US defense budget, amounting to about $900 billion. In terms of debt service costs, it ranks third among federal spending items, after social security ($1.6 trillion) and healthcare (almost $1.1 trillion), Oleg Abelev said.

The conflict in the Middle East is also increasing the burden on the American budget. At the same time, not only the direct costs of military support have a significant impact, but also the indirect economic consequences of the confrontation. Among them are rising fuel prices, accelerating inflation and rising interest rates, according to Freedom Global macroeconomist Yuri Ichkitidze.

During the eight months of fighting between Washington and Tehran in the Middle East, the US national debt increased by about $1.77 trillion. Izvestia conducted such calculations based on data from the US Treasury Department.

Is it possible to solve the problem of the growing US national debt

Now the US authorities are trying to contain the growth of public debt. The administration of Donald Trump relies on revenue from duties and an increase in GDP, hoping to reduce the debt burden due to this, Oleg Abelev noted. However, the possibilities of such measures are limited.

The tariff policy faces legal obstacles. The US Supreme Court previously declared some of the duties imposed illegal. In addition, tariff increases for trading partners provoke retaliatory measures, which limits the economic effect of such a policy, the expert said.

To stabilize the situation, the authorities need to reduce the budget deficit, says Yuri Ichkitidze from Freedom Global. However, drastic spending cuts could have serious political consequences for the administration of Donald Trump. It is extremely difficult to reduce social benefits and healthcare costs in the United States, Oleg Abelev noted. The tax increase, in turn, contradicts the president's election promises.

In his opinion, a reduction in interest rates, which would reduce the cost of servicing the national debt, could ease the debt burden. However, such a step is possible only if inflation slows down. An additional effect could be provided by productivity growth through the introduction of new technologies, added Yuri Ichkitidze.

However, a full-fledged debt crisis in the United States is unlikely in the next few years, experts interviewed by Izvestia believe. At the same time, surges in government bond yields and a temporary deterioration in liquidity cannot be ruled out. The main risk is associated with a combination of weak economic growth, sustained inflation, a significant budget deficit and the inability of the authorities to agree on cost adjustments, explained Yuri Ichkitidze.

The US government debt ceiling is set at $41.1 trillion. At the current rate of borrowing growth, the volume of liabilities may approach this level after the New Year.

Why American government securities attract investors

In recent months, major holders of US government debt have begun to review the structure of their investments — some countries have reduced investments in US government bonds, but their portfolios remain significant. So, in August, the volume of US government securities in Japan amounted to $1.06 trillion— which is 3.2% less than in July. China's investments decreased by 4.5% to $591 billion.

By the end of August, Russian investments in US government securities decreased to $25 million, which is more than 2 billion rubles at an average monthly exchange rate of 83.09 rubles per dollar. A year earlier, the figure was $39 million. Against the background of the US government debt of $40.5 trillion, Russian investments are insignificant and do not affect the stability of the domestic financial market.

The Russian Federation began to reduce investments in the US national debt back in 2018 against the background of sanctions risks. In April of that year, the volume of American securities in Russian portfolios decreased from $96 billion to $48.7 billion.

Despite the reduction, the total amount of funds invested by different countries in US bonds remains significant. One of the reasons for the interest in these securities is the depth and liquidity of the market, explained Salavat Alparov, CEO of Gamma Group Management Company. The volume of U.S. Treasury bonds in circulation exceeds $40 trillion, and the daily turnover reaches hundreds of billions of dollars. An investor can buy or sell securities of almost any maturity and volume with a minimal difference between the purchase and sale price. No other sovereign debt market provides a comparable level of liquidity, he noted.

In addition, there is no fully-fledged alternative in the world as a whole. European bonds are backed by an economy that is growing slower than the American one, Japanese securities give negative real returns, and the Chinese market is limited by capital controls, the expert said. For central banks, pension funds, and insurance companies from different countries, Treasuries remain the main tool. Therefore, even investors who reduce the share of American securities cannot always find a replacement on a comparable scale.

Interest in U.S. government bonds is also supported by high risk-adjusted yields. Now, with the rate on 10-year securities above 5% and inflation at 3.4%, the investor gets a net 2 percentage points as a result, explained Alina Poptsova, stock market analyst at Alfa Capital Management Company. Moreover, in order to maintain interest in bonds, the authorities are forced to increase this yield. Today, it is at its highest level in the last 15 years.

However, there is no single threshold after which U.S. government bonds will cease to be attractive to investors. A combination of factors is important: the ratio of government debt to GDP, the cost of servicing it, the ratio of interest rates to economic growth, inflation expectations, as well as the willingness of the authorities to adjust budget policy, said Yuri Ichkitidze from Freedom Global. Even a high debt burden does not mean an imminent crisis, but it reduces the margin of economic strength.

The growth of the US national debt also affects the global economy. Increasing obligations increases the cost of their maintenance. In order to attract buyers of new bonds, the Ministry of Finance has to offer higher yields. This increases the cost of borrowing in the country and makes American assets more attractive compared to emerging market assets. As a result, capital can flow to the United States, and the dollar can strengthen.

For countries with debts in dollars, this means an increase in the cost of servicing obligations in national currency, Salavat Alparov noted. In turn, this situation may trigger a debt crisis in these countries.

What about the national debt in Russia

The absolute volume of Russian government debt and its share in the economy are significantly lower than in the United States. As of October 1, the total amount of domestic and foreign government borrowings amounted to about 41.3 trillion rubles, about 18% of the country's GDP. In terms of rubles, this is 79 times less than in the United States.

Nevertheless, the Russian authorities also need to monitor the growth rate of debt servicing costs, explained Oleg Abelev from Rikom-Trust.

In recent years, the Russian budget has remained in deficit. For the next three years, the Ministry of Finance forecasts a deficit of about 2% of GDP annually. The authorities plan to gradually reduce it.

To cover the deficit, the Ministry of Finance is actively borrowing in the market, and the cost of servicing the national debt is growing. If the key interest rate remains high and the deficit continues to increase, the burden on the budget will increase. At the same time, the Bank of Russia intends to continue reducing the rate: next year, the regulator predicts its average level in the range of 12.5–13.5%.

There is practically no risk of an external debt crisis in Russia, since almost all government debt is denominated in national currency, and the main holders of obligations are domestic rather than foreign investors, Oleg Abelev said.

The main challenge for our country now is the pace of economic growth. If they remain low, even a small budget deficit will gradually increase the national debt, said Boris Kopeikin, chief economist at the Stolypin Institute for Growth Economics. As the economy accelerates, the ratio of government debt to GDP will begin to decline. To do this, it is necessary to create appropriate conditions: to stimulate investment, increase labor productivity, develop competition and introduce new technologies.