The world went on a debt binge last year. There could be a nasty hangover.

Spurred on by rock-bottom rates, governments issued $16.3 trillion in debt in 2020, and they’re expected to borrow another $12.6 trillion this year, according to S&P Global Ratings. But fears are growing that an explosive economic comeback starting this summer could generate inflation, potentially forcing central banks to raise rates sooner than expected.

Should that happen, the cost of servicing mountains of sovereign debt will jump, eating up government funds that could otherwise be spent on essential services or rebuilding weakened economies. US lawmakers approved a mammoth $1.9 trillion stimulus package on Wednesday that could send prices higher and increase pressure on the Federal Reserve…

S&P Global Ratings pointed to inflation as a potential concern in a report on sovereign debt this month, noting it “could push central banks to increase interest rates, partially reversing the benefits of low debt-servicing costs.”

“A big jump in interest rates would be very costly,” said Ugo Panizza, professor of international economics at the Graduate Institute in Geneva. “Central banks will face very, very complicated tradeoffs if inflation does go up.”