Global sovereign debt to hit new all-time high: S&P

LONDON: Worldwide sovereign debt is set to reach a new record high of $44 trillion this year despite a slight reduction in governments’ annual borrowing, an estimate from credit ratings agency S&P Global said on Friday.

The firm calculated that this year’s sovereign borrowing was likely to be $6.8 trillion, down around 4 percent or $315 billion on 2016’s amount and to 9 percent of global gross domestic product (GDP).

Absolute debt levels will continue to increase however. S& P projects an almost $ 1 trillion rise to $ 44.3 trillion, up 2.3 percent at projected market exchange rates.

The US at $2.2 trillion and Japan at over $1.8 trillion will again be the most prolific borrowers this year, accounting for 60 percent of the total, followed by China, Italy and France.

Moritz Kraemer, S&P’s chief sovereign analyst, said that using the idea of a calendar gave a perspective of the huge scale of US borrowing.

If it were distributed evenly across the year, US issuance “would have already covered Switzerland’s 2017 borrowing needs at lunchtime on Jan. 1; Brazil’s on Jan. 30 and Italy’s on Feb. 17,” Kraemer said.

With the exception of Japan, it would then have passed China’s and also the rest of the world’s by Feb. 28.

Britain’s post-Brexit double downgrade will mean the percentage of world debt now with a top grade “triple-A” rating will fall to an all-time low of just 7 percent down from around 13 percent a year ago.

S&P’s calculations also showed Japan faces by far the highest debt rollover ratio this year, reaching a sum equivalent to 66 percent or two-thirds of the size of its economy.

Japan had the highest debt levels in the world at 254 percent of GDP in 2016, followed by Greece and then Lebanon at 142 percent.