For Institutional Investors in the US

Sovereign Debt Levels Hit New Records in 2021

Apr 7, 2022

The second edition of the Janus Henderson Sovereign Debt Index, an annual long-term study into trends in government indebtedness around the world, shows that global government debt jumped to $65.4 trillion in 2021 as every country we examined increased borrowing. Global Bonds Portfolio Manager Bethany Payne discusses the study’s findings and our outlook for 2022.

Key Takeaways

  • Since the pandemic began, global sovereign debt has soared by over a quarter, up from $52.2 trillion in January 2020 to today’s record of $65.4 trillion.
  • Despite the surging level of borrowing, debt servicing costs fell to a record low of $1.01 trillion in 2021, an effective interest rate of just 1.6%.
  • We predict government debt will rise 9.5% in 2022, with the U.S., Japan and China accounting for most of that increase.
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Bethany Payne: We’ve just launched the second edition of our Sovereign Debt Index. Global government debt rose to $65.4 trillion in 2021, an increase of 7.8% since the pandemic began. Global sovereign debt has soared by over a quarter and has tripled in two decades.

China’s debts rose the fastest and by the most in cash terms, up by a fifth, or $650 billion. Among large, developed economies, Germany saw the biggest increase in percentage. The country’s borrowings rose by one-seventh, almost twice the pace of the global average. U.S. government borrowing has also soared to $22.3 trillion, up $1.3 trillion year on year. U.S. government debt is now a third larger than its pre-pandemic level, compared to an increase of just over a fifth for the rest of the world. Meanwhile, the Mexican government’s conservative fiscal approach to the pandemic saw it increase its debts by only 13.8% between 2019 and 2021, which is the lowest increase anywhere in emerging markets.

Despite the surging level of borrowing, governments still enjoyed extremely low interest bills in 2021. Last year, the effective interest rate on all debt was just 1.6%, down from 1.8% in 2020. The cost to European nation’s taxpayers of servicing that debt fell to just $186 billion, its lowest in at least 25 years.

Japan’s debt servicing costs remain extremely low at $23 billion in 2021. They’re similar to Spain’s, despite borrowing levels seven times greater. But now accelerating inflation has pushed up market interest rates, and this will raise the cost of servicing the COVID-19 debt burden.

Inflation-linked bonds make up a relatively large share of the UK’s debt mix, worth around a quarter of the total outstanding. The UK is spending more servicing its inflation-linked bonds than all other developed economies.

So, what can we expect from 2022? Well, going forward we predict government debt will rise 9.5% in 2022, with the U.S., Japan and China accounting for most of that increase. And the global government interest bill will rise also in 2022, up by 14.5% on a constant currency basis.

For more details and to read our full report, please visit our website.


Unless otherwise stated, all data is sourced by Janus Henderson Investors as of 31 December 2021.

Apr 7, 2022