This edition of the OECD Sovereign Borrowing Outlook reviews continuing developments in response to the COVID-19 pandemic for government borrowing needs, funding conditions and funding strategies in the OECD area. It discusses the implications of the COVID-19 crisis on sovereign refinancing risk, and how to identify, measure and mitigate refinancing risk in light of country experiences. It then examines debt issuance trends for government securities in emerging market and developing economies in recent years, and presents novel insights on the impact of the COVID-19 pandemic on issuance conditions in these economies.

More than a year into the COVID-19 pandemic the human and economic tolls have been extraordinary. The crisis saw economic life slow considerably, with sharp contractions in GDP across nations. Considerable countercyclical monetary and fiscal policy responses have since helped many economies to rebound, and largely avoided compounding economic and financial crises onto a global health crisis. Such ambitious interventions were necessary, but did not come without a cost. The 2021 OECD Sovereign Borrowing Outlook explores the impact on sovereign borrowing needs and borrowing conditions.

The upsurge in government spending and reduced revenue collection in the wake of the COVID-19 crisis mean that the gross borrowing needs of governments have risen significantly. OECD governments borrowed USD 18 trillion from the markets in 2020, equal to almost 29% of GDP. Compared to 2019, this was 60% more in absolute terms, and 12 percentage points higher relative to GDP. This year’s survey results forecast a continuation of this upward movement in 2021, albeit at a slower pace. However, 2021 projections are subject to a high degree of uncertainty largely due to the pace of the pandemic, the global economic outlook and changes in government fiscal policy responses.

The year 2020 witnessed a massive increase in sovereign borrowing needs. This was the result of both a surge in government spending and reduced revenue collection due to the COVID-19 crisis. With record-low interest rates reducing the cost of borrowing and robust demand for government securities, sovereign issuers in the OECD area have successfully adapted their issuance strategies to the changing environment and significantly increased debt issuance without undermining the functioning of sovereign bond markets. As sovereigns’ financing needs for debt repayments are soaring, persistent global uncertainties call for prudent debt management.This chapter assesses the impact of the COVID-19 crisis on sovereign borrowing needs and debt issuance for 2020 and 2021. It looks at how sovereign debt management offices have been dealing with the large and unexpected increase in governments’ borrowing needs, including adjustments made to borrowing strategies and techniques. In view of continued global uncertainties and higher government refinancing needs, the chapter also provides recommendations to assist policy makers in their efforts to navigate through the crisis.

Sovereign refinancing risk is attracting more attention due to the impact of the COVID-19 shock on sovereign borrowing needs. The surge in government borrowings to finance COVID-19 stimulus and related bailout packages throughout 2020 mechanically increased the outstanding debt that must be refinanced in the future. While most governments in the OECD area today are paying very little interest to new borrowings across all maturities, the risk associated with the refinancing of debt at substantially higher rates is more of a medium- and long-term concern for most countries and a potential a short-term concern for at least some countries. Against this backdrop and from the perspective of a public debt manager, this chapter discusses how to identify measure and mitigate refinancing risk in light of possible scenarios as well as country experiences.

In the global fight against the COVID-19 pandemic and its detrimental social and economic impact, governments have launched various measures since March 2020. This, combined with reduced tax revenues, has resulted in an upsurge in sovereign borrowing needs globally. While most advanced economies have been experiencing ultra-low interest rates and strong demand for public debt, a number of underlying vulnerabilities have made borrowing conditions more difficult for many developing and emerging market economies.The pandemic greatly complicated the ability of developing and emerging market sovereign issuers’ to access to the markets in 2020, in particular at the initial stages of the crisis. The global risk-off environment resulted in sharp reversal of capital flows, which had a particularly profound impact on market access of non-investment grade issuers. This chapter presents an overview of debt issuance trends in developing and emerging market economies, and assesses the impact of the COVID-19 crisis on issuance conditions.