The 2020 edition of the OECD Sovereign Borrowing Outlook, with revised sections taking into account the impact of COVID-19 pandemic, provides data, information and background on sovereign borrowing needs and discusses funding strategies and debt management policies for the OECD area and country groupings, including:

The COVID-19 pandemic is the most serious global health crisis in living memory. The virus and the policies put in place to slow its spread have precipitated a dramatic decline in economic activity, and OECD economies are now facing the worst recession since the Great Depression.

The pandemic-related surge in government financing needs has resulted in OECD governments raising a record amount of funds from the market. From January to May 2020, governments issued debt securities worth USD 11 trillion – almost 70% higher than average issuance in the same period over the past five years. In addition to financing the COVID-19 rescue and related fiscal stimulus packages, increased precautionary financing and short-term cash needs to smooth out cash flow disruptions contributed to the surge in sovereign issuance during this period.

Impact of the COVID-19 pandemic - To tackle the health crisis caused by the COVID-19 pandemic and its massive impact on economies and financial markets, governments and central banks of the OECD countries have deployed a wide range of measures since March 2020. In addition to large discretionary fiscal stimulus packages, automatic fiscal stabilisers have also led to sudden and significant increases in cash requirements. As a result, sovereign borrowing needs have surged in many countries.During the first five months of this year, OECD governments increased their issuance of debt securities significantly, in total surpassing the historical average by almost 70% with significant variation across countries. The total market borrowing is expected to reach an unprecedented level of USD 28.8 trillion in bonds and bills in 2020. With interest rates are at record lows reducing the cost of borrowing in most OECD countries, the primary challenge for many sovereign issuers is to increase debt issuance significantly without undermining the functioning of sovereign bond markets.

Over the last few decades, sovereigns of emerging market and developing economies have increasingly turned to capital markets to meet their financing needs. With the growth in marketable debt and supported by strengthened macroeconomic frameworks, local bond markets have deepened and public debt management capacity has improved in many of these economies. Drawing on the lessons learned from the several previous sovereign debt crises, many countries have also made important improvements in their public debt risk management systems. Despite these advances, the COVID-19 pandemic has demonstrated that sovereign debt markets for emerging economies are still highly vulnerable to global risks.Using transaction level data from 107 countries, this chapter examines issuance trends of government securities in emerging market and developing economies since 2000. It first looks at currency, rating and maturity composition of debt issuance from 2000 to 2019. It then provides novel insights about the impact of the COVID-19 pandemic on debt issuance conditions for these countries.

The COVID-19 pandemic presents a historic challenge for sovereign debt management offices. In addition to operational challenges, liquidity and funding risks have escalated to unprecedented levels during the crisis. Debt management preparedness to respond to these challenges is critical for supporting both the efficacy of each government’s emergency response and the smooth functioning of financial markets.This chapter discusses how debt management offices of the OECD countries can adapt their governance practices to prioritise and deal with various aggravated operational and market risks in these times of a major crisis in order to achieve their objectives.