The amount of money spent by governments subsidising energy costs since Russia’s invasion of Ukraine is set to reach $1.65 trillion by the end of the year, credit ratings agency S&P Global has estimated.
The firm calculated the total soared to $10 trillion once COVID pandemic spending was added on and that this year would see the overall stock of global sovereign debt reach a record $65 trillion in absolute terms.
S&P based the figures on the 137 countries that it provides credit scores for.
It forecast those countries would borrow the equivalent of $10.5 trillion this year, below the record $11.5 trillion set in 2021, but 40% higher than the pre-pandemic average.
Commercial sovereign debt as a proportion of world GDP will increase to about 66% this year from just under 64% last year although that will be well below the pandemic-induced peak of 74% of GDP in 2020.
A resumption of an upward trend however and comes against the backdrop of surging global interest rates which mean developed world governments will be paying roughly double what they were to borrow 12 months ago.
“Europe and Latin America will post the biggest increases in borrowings amid stagnant growth and budgetary pressures, including from high energy prices,” a report published by S&P on Thursday said.
Europe is set issue about $1.75 trillion of debt it added although the United States and Japan will remain by far the largest borrowers overall accounting for about 36% and 17% of the global total respectively.
Developing world borrowing costs are also approaching levels not seen in more than a decade and as emerging market bonds tend to have shorter timeframes the impact of higher costs has been rapid for many.
“For countries with large debt stocks and reliance on foreign currency borrowings, high interest bills represent a significant risk,” S&P said, adding a “significant number” of countries with weak credit ratings of ‘B’ or lower were at “high risk of debt distress”.
