For more than a decade, the world developed an unusual tolerance for bad decisions.

A company could overpay for an acquisition and wait for growth to rescue the valuation. A property developer could buy land without immediate cash flows and refinance while prices caught up. Governments could approve projects with questionable economics, roll over debt and leave the real cost to another budget. Investors could fund businesses that promised profitability somewhere in the future.

Pakistan never really enjoyed the cheap-money era. Its policy rate reached 22 per cent in 2023.Geographic Reference

Pakistan never really enjoyed the cheap-money era. Its policy rate reached 22 per cent in 2023.

Cheap money did not make these decisions good.

It simply gave them more time to avoid looking bad.

That era is giving way to something less forgiving. Short-term interest rates have begun easing in several economies, but the cost of long-term capital has not obediently followed. Governments are borrowing unprecedented amounts, refinancing enormous existing debt stocks and competing with corporations for capital at precisely the moment the world needs trillions for artificial intelligence, energy, defence and infrastructure.

The result may be one of the most important changes in economic behaviour over the coming decade.

We are entering the age of expensive mistakes.

The numbers tell part of the story. According to the OECD’s Global Debt Report, OECD governments borrowed a record $17 trillion in 2025 and are projected to borrow around $18 trillion in 2026. More revealingly, roughly $13.5 trillion of the 2025 requirement was refinancing, close to 80 per cent of total borrowing.

Long-term markets are demanding a price for this. Median 30-year government bond yields across OECD countries rose from 3.2 per cent to 4.1 per cent during 2025. Governments have responded partly by issuing more short-term debt, reducing the immediate cost but increasing the frequency with which they must return to markets.

That is not a debt crisis. It is something........

© Daily Times