The Magazine for Asian Investors
Janus Henderson, a major U.K. asset management firm, released its latest report that global government debt is expected to rise 9.5% to a record high of $71.6 trillion by 2022.
The Sovereign Debt Index, published by Janus Henderson on April 6, says rising government debt in the U.S., Japan, and China are the main drivers of global sovereign debt. It has risen 9.5% this year, with most countries expected to continue borrowing more.
In 2021, global government debt increased by 7.8% to $65.4 trillion. As governments in all countries issued bonds to raise funds, debt service costs fell to a record low of $1.01 trillion as the effective interest rate was only 1.6%.
However, the cost of debt will increase significantly by 2022, rising 14.5% to $1.16 trillion.
The UK is likely to be hit hardest by rising interest rates and inflation, which have weighed on the quality of its debt. Added to this are the costs incurred by the Bank of England’s (BoE) reduction in quantitative easing (QE).
“The spread of COVID-19 has had a heavy impact on government borrowing. In addition, the war in Ukraine is likely to put pressure on Western governments to borrow more [and] to raise funds for defense spending,”said Bethany Payne, Janus Global Bonds Manager. Henderson.