Pandemic Causing Sovereign Debt Burden to Rise

As highlighted in the World Bank World Development Report 2022, sovereign debt increased in all country income groups in 2020 as governments battled with the pandemic. 

Managing and reducing sovereign debt levels will be a key challenge for a sustainable recovery. However, as the report points out, the debt landscape is rapidly changing with an increase types of creditors of sovereign debt.

In low- and middle-income countries, private creditors account for a large and increasing share of creditors, with bonds as the dominant instrument for sovereign debt from private creditors. 

As the World Bank states in the report:

coordination between debtors and creditors has become more difficult than in previous crises because of the greater number of creditors and the higher participation of commercial and nontraditional creditors in the market for sovereign debt. 

Link to full report: World Development Report 2022