Government Borrowing Jumps by Most on Record in Covid Pandemic

(Bloomberg) -- Government borrowing from markets in the world’s richest economies surged by a record 60% in 2020, with an increasing reliance on short-term funding that intensifies refinancing risks, the Organization for Economic Cooperation and Development said.

The jump is almost double that recorded in the 2008 financial crisis, and borrowing is expected to increase further still in 2021, albeit at a slower pace, to reach $19.1 trillion.

Record low interest rates following swift and massive interventions from central banks have reduced the cost of the additional debt. In 2020, more than 20% of government bonds in OECD countries were auctioned at negative yields.

Still, the Paris-based organization warned that the share of short-term instruments in debt issuance has also jumped. Combined with an increase in funding needs, that weakens the resilience of governments and raises risks of refinancing difficulties, the OECD said in a report published Thursday.

“Prudent debt management will be required as financing needs for debt repayments soar and the outlook for the global economy remains uncertain,” the OECD said.

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