GOVERNANCE WATCH
By InsidEntity Editorial Desk · Sep 24, 2026 · 13 min read
InsidEntity Insights | Economic Sustainability Rating | 24 September 2026
United States, United Kingdom, Canada, South Africa, Australia, China
The number
The world now owes more than US$365 trillion. The Institute of International Finance’s Global Debt Monitor, published on 23 September 2026, shows global debt rose by about $10 trillion in the first half of the year, with emerging markets, led by China, accounting for about $6.5 trillion of the increase.
That figure is not government debt alone. It adds together four borrowers, governments, households, non-financial companies and the financial sector, across more than 100 economies. The IIF puts global debt at roughly 310% of world GDP and estimates that more than $30 trillion is approaching maturity and will need to be refinanced, much of it at higher rates than it was first borrowed at.
A debt number that large tells you the weight. It does not tell you which economies can carry it. That is where InsidEntity starts every assessment: with the Economic Sustainability Rating.
Why the ESR comes first
The ESR is designed as InsidEntity’s country-level early signal of economic pressure. It multiplies a country’s inflation rate by its unemployment rate, because both can shift before the consequences show up in company earnings, household finances, credit performance or government debt-service costs.
The gauge has five bands: Benchmark from 1 to 25, Efficient from 26 to 50, Stable from 51 to 100, Inefficient from 101 to 150, and Unsustainable from 151. The scale has no upper limit. 150 marks the top of the Inefficient band, not a cap, and a higher score is shown as calculated: Venezuela’s country page currently reads 1,976. The ESR runs the opposite way to the company instruments, so a low reading is the better one.
The band names describe where a reading sits on the scale. They are labels for ranges of the product, not forecasts of what will happen to an economy in that range.
The logic is simple. Inflation erodes what households earn; unemployment removes the earning altogether. Where both are low, the pressure on household incomes is lower. Where either is high, the debt stock above them becomes harder to carry, whoever holds it.
InsidEntity’s reading order runs from macro to micro: the ESR for the economic environment first, then the Company Risk Rating for governance, the Health Status Rating for company risk and the Financial Stability Rating. A strong company in an unsustainable economy is still exposed to that economy.
Six economies, one table
The ESRs below are calculated with the published formula on the latest official inflation and unemployment releases available on 24 September 2026. Government debt is shown alongside, because the ESR measures economic pressure on households and businesses, not the state of the public balance sheet. The two together tell the fuller story.
| Country | Inflation | Unemployment | ESR | Band | Government debt |
|---|---|---|---|---|---|
| China | 0.8% (Aug) | 5.3% (Aug, surveyed urban) | 4.2 | Benchmark | 106.9% of GDP (IMF 2026 projection) |
| United States | 3.4% (Aug) | 4.1% (Aug) | 13.9 | Benchmark | 125.8% gross (IMF); debt held by the public above 100% |
| United Kingdom | 3.1% (Aug) | 4.9% (May to Jul) | 15.2 | Benchmark | 103.6% of GDP (IMF 2026 projection) |
| Australia | 3.5% (Jul) | 4.6% (Aug) | 16.1 | Benchmark | 50.6% of GDP (IMF 2026 projection) |
| Canada | 3.0% (Aug) | 6.4% (Aug) | 19.2 | Benchmark | 110.7% of GDP (IMF 2026 projection) |
| South Africa | 4.4% (Aug) | 33.6% (Q2) | 147.8 | Inefficient | 78.9% of GDP, stabilising (National Treasury) |
How to read this table.
- The ESR is a signal, not a full diagnosis. It multiplies two rates, so it rewards low inflation whatever the cause. Inflation held down by weak demand scores as well as inflation held down by a healthy economy, and a very low inflation rate can offset high unemployment. The ESR tells you where pressure is emerging, so you know where to look next.
- The debt figures use national definitions. The US, UK, Canada, Australia and China use the IMF’s general government gross debt; South Africa uses National Treasury’s gross loan debt. Read the column for scale and direction, not as a precise ranking.
Five of the six sit in the same band, Benchmark, between 4.2 and 19.2. The band is wide: it holds both China, with prices barely rising, and Canada, with 6.4% of its workforce out of work. South Africa, at 147.8, sits on its own in Inefficient, nearly eight times the next highest reading and 3.2 points below the Unsustainable line.
United States: the biggest borrower, the second-lowest ESR
ESR 13.9 (inflation 3.4% × unemployment 4.1%)
The US is the largest borrower in this group, and its pressure is building in the cost of its debt rather than in its households. Payrolls rose by 162,000 in August and unemployment held at 4.1%. Inflation held at 3.4%, pushed up by fuel, while core inflation eased to 2.4%, its lowest since March 2021.
The balance sheet is a different matter. At the end of March 2026, US debt held by the public, at $31.27 trillion, exceeded the size of the economy, at $31.22 trillion. The all-time record for that measure, 106% of GDP, was set in 1946, and the Congressional Budget Office expects it to be broken around 2030. The IMF puts US general government gross debt at about 126% of GDP this year, rising to about 142% by 2031, the steepest climb among major advanced economies.
What has changed is the price of that debt. Investors have been selling government bonds around the world. The US 10-year Treasury yield went through 5% on 15 September, its highest level since 2007, having last crossed 5% in October 2023. It rose again on 23 September after strong business surveys revived inflation fears, touching 5.13% at one point, according to Reuters. The IIF notes that advanced economies paid more than $3.3 trillion in interest on government bonds last year, more than the world spent on AI or on defence.
A moderate ESR buys time. It does not settle the bill.
United Kingdom: a similar ESR, a tighter squeeze
ESR 15.2 (inflation 3.1% × unemployment 4.9%)
UK inflation rose to 3.1% in August from 2.9%, with petrol and diesel the largest contributors. Unemployment is 4.9%, up 0.2 points on the year, and vacancies have fallen for eight quarters in a row to 702,000.
Public sector debt is close to £3 trillion, about 93.8% of GDP. The IIF names the UK alongside the US, Japan and France as economies running persistently large deficits with rising interest costs. Ten-year gilt yields rose to their highest level since 2007 in the September sell-off. The UK’s ESR is only marginally worse than America’s; the difference is that it carries elevated debt, rising borrowing costs and a softening labour market at the same time.
Canada: unemployment carries the rating
ESR 19.2 (inflation 3.0% × unemployment 6.4%)
Canada’s inflation, at 3.0%, is the lowest of the four advanced economies in this group, and the Bank of Canada’s core measures are close to 2%. The ESR is lifted by the labour market: unemployment is 6.4%, and the economy shed 42,000 jobs in August, ending a strong spring.
The IMF places Canada’s general government debt around 111% of GDP in 2026, but on a falling path, to about 104% by 2031. Canada is one of the few economies in this group where the debt trajectory is improving while the ESR is under pressure, and the pressure comes from jobs rather than prices.
Australia: the lowest debt, a rate decision next week
ESR 16.1 (inflation 3.5% × unemployment 4.6%)
Australia carries the lightest government debt of the six, about 51% of GDP. Its ESR is pushed up by both inputs: annual CPI was 3.5% to July, and unemployment rose to 4.6% in August, the highest since late 2021.
The Reserve Bank of Australia meets on 28 and 29 September and markets expect another increase. August CPI is released on 30 September, so this ESR will move within a week of publication.
China: the lowest ESR, the biggest caveat
ESR 4.2 (inflation 0.8% × unemployment 5.3%)
On the formula, China is the Benchmark of this group by a wide margin. Read it with care. China’s inflation is low because demand is weak, not because the economy is running smoothly: food prices fell 1.4% in the year to August, and CPI has averaged 0.9% this year. The ESR rewards low inflation, whatever the cause.
China also accounted for the largest share of the $6.5 trillion rise in emerging-market debt in the first half of 2026. The IMF projects general government debt at about 107% of GDP this year, rising to about 127% by 2031, and that measure does not capture all local-government financing vehicle borrowing. A low ESR here is the start of the due diligence, not a reason to skip it.
South Africa: a tenth of a point of inflation from the Unsustainable band
ESR 147.8 (inflation 4.4% × unemployment 33.6%), Inefficient band
South Africa’s ESR is nearly eight times the next highest in this group, and the reason is one number. Official unemployment rose to 33.6% in the second quarter of 2026, with 8.5 million people unemployed. Inflation, at 4.4% in August, is moderate by South African standards. It is unemployment that puts the reading in the Inefficient band, the second-highest on the gauge.
It also puts the reading on a knife edge. With unemployment at 33.6%, the ESR crosses into the Unsustainable band, 151 and above, at an inflation rate of 4.5%: 4.5 × 33.6 = 151.2. That is one tenth of a percentage point above August’s rate. Held the other way, with inflation at 4.4%, it would take unemployment of about 34.3%, a rise of 0.7 points.
South Africa’s government debt is in better shape than most of this list. National Treasury’s 2026 Budget has gross loan debt stabilising at 78.9% of GDP in 2025/26, for the first time in 17 years, and declining to 76.5% by 2028/29. The debt stock is levelling off. The economic pressure the ESR captures is not.
The rate hike in household terms
On 23 September the South African Reserve Bank’s Monetary Policy Committee voted unanimously to raise the repo rate by 25 basis points to 7.25%, taking prime to 10.75% from 25 September. It is the second increase this year. Governor Lesetja Kganyago pointed to intensifying fuel-price shocks and global rates moving higher, and noted that longer-run inflation expectations are around 4%, above the 3% target. The economy contracted by 0.2% in the second quarter.
eNCA’s Number of the Day, presented by Francis Herd, put the cost to homeowners at about R170 a month on a R1 million bond, rising to roughly R840 on a R5 million bond. We checked the arithmetic on a 20-year bond at prime:
| Bond | Monthly at 10.50% | Monthly at 10.75% | Increase |
|---|---|---|---|
| R1 million | R9,984 | R10,152 | R168 |
| R2 million | R19,968 | R20,305 | R337 |
| R5 million | R49,919 | R50,761 | R842 |
That is where the ESR’s macroeconomic signal meets household arithmetic. The SARB expects headline inflation to rise above 5% late this year and early next year before returning towards its 3% target by the end of 2027. The threshold sits well inside that forecast. If unemployment holds at 33.6% and inflation reaches 5%, South Africa’s ESR would be 5.0 × 33.6 = 168, inside the Unsustainable band rather than at its edge. On the Reserve Bank’s own inflation path, the question is less whether the reading crosses 151 than how soon.
Have bonds always been a safe investment?
No. Government bonds earned their reputation for safety during one unusually long, favourable period, and the record since 1960 falls into four broad episodes.
- 1960 to 1981. Inflation and rising yields produced a long bond bear market. Bonds paid about 5.4% a year, but inflation took most of it.
- 1981 to 2020. The US 10-year yield fell from above 15% at its 1981 peak to about 0.5%, a four-decade bull market. The 60/40 portfolio was built in this era.
- 2022. Inflation and rate increases broke the pattern. The Bloomberg US Aggregate Bond Index fell 13%, its worst year on record, and a 60/40 portfolio lost more than 16% as equities fell too.
- 2026. Yields above 5%, the highest since 2007, have restored income, but holders of older, lower-yielding bonds carry the losses.
How investment strategy is changing
Reuters’ analysis of 23 September points to four shifts.
- Bonds as an income asset again. Invesco’s Paul Jackson is moving some money from equities into government bonds to lock in yields above 5%.
- Emerging markets pay the price. Higher US yields strengthen the dollar and pull capital home, and emerging-market bond funds have seen their largest outflows in months. South Africa sits in this group, which adds pressure on the rand and on local borrowing costs just as the SARB is raising rates.
- Equity valuations have not caught up. Premier Miton’s Neil Birrell warns that share prices may look stable only because investors have not yet built sustained 5% yields into their long-term forecasts.
- The 6% question. Markets are debating where the pain threshold lies; JP Morgan suggests between 5.5% and 6%.
The underlying change is one of mindset. For forty years investors could treat government bonds as close to risk-free. With $365 trillion of debt outstanding and interest bills climbing, they now have to assess governments as borrowers, much as they assess companies. That is the case for starting with the economic environment: the ESR asks how much pressure sits underneath the debt stock before the next dollar is borrowed.
This section describes market developments and is not investment advice.
What the ESR shows, and what it does not
Put the ESR next to the debt ratio and the six economies fall into three groups, with Australia standing apart.
- Lowest ESRs, rising debt: China and the United States. The ESR indicates relatively low economic pressure, but government balance sheets are growing fastest. The risk sits in the future cost of servicing that debt, especially as yields rise.
- Higher within Benchmark, heavy or rising interest costs: the United Kingdom and Canada. Canada’s debt is falling; the UK’s cost of borrowing is climbing. Both depend on their labour markets holding up.
- Inefficient and close to the line, stabilising debt: South Africa. The fiscal position is improving; the economic pressure the ESR captures is high and one inflation print from the Unsustainable band.
- Australia has the lowest debt and an ESR inside Benchmark, with both inputs currently moving the wrong way.
All four groupings except South Africa sit inside the same band. The distinctions between them come from the readings and the debt ratios, not from the band labels.
The $365 trillion figure is a stock. The ESR measures the flow of pressure on the people and companies who ultimately carry it. Anyone assessing a company in any of these six countries should start with the ESR, then move to the CRR, HSR and FSR for the company itself.
Independent research. Not financial or investment advice.
Know more. Risk less. Decide better.
Sources: Institute of International Finance, Global Debt Monitor, 23 September 2026, as reported by CNBC, Quartz and Forbes; InsidEntity Economic Sustainability Rating; United States: BLS CPI and Employment Situation, August 2026; Congressional Budget Office; United Kingdom: ONS CPI, August 2026, and ONS labour market release, September 2026; Canada: Statistics Canada CPI and Labour Force Survey, August 2026; Australia: ABS CPI, July 2026, and Labour Force, August 2026; China: National Bureau of Statistics CPI and surveyed urban unemployment, August 2026; South Africa: Stats SA CPI, August 2026, and Quarterly Labour Force Survey, Q2 2026; National Treasury, Budget 2026; South African Reserve Bank, Monetary Policy Committee statement, 23 September 2026; eNCA, Number of the Day; IMF World Economic Outlook and Fiscal Monitor, April 2026; Reuters, 15 and 23 September 2026; A Wealth of Common Sense on bond market history.
Note on figures: ESR figures are presented to one decimal place unless otherwise stated. Earlier InsidEntity pieces rounded to whole numbers, so the United States appears there as 14 on the same inputs. The inflation rate at which South Africa crosses 151 is this publication’s arithmetic: 151 ÷ 33.6 = 4.49%, which is 4.5% at the precision Stats SA publishes. The platform’s country pages are the authoritative record. Inputs are the latest official releases at 24 September 2026 and refer to different months where release schedules differ. Government debt figures use the IMF’s general government measure except for South Africa, and are indicative, not strictly comparable. The bond repayment table is this publication’s calculation on a standard 20-year amortising bond at prime.