Since 2014, the Bank of Canada (BoC) has maintained a comprehensive database of sovereign defaults to systematically measure and aggregate the nominal value of the different types of sovereign government debt in default. The database draws on previously published datasets compiled by various public and private sector sources. It combines elements of these, together with new information, to develop comprehensive estimates of stocks of government obligations in default. These include bonds and other marketable securities as well as bank loans and official loans, valued in US dollars, for the years 1960 to 2020 on both a country-by-country and a global basis.
The database is posted on the BoC’s website and is updated annually in partnership with the Bank of England (BoE). This update of the BoC–BoE database—and updates to come—will be useful to researchers analyzing the economic and financial effects of individual sovereign defaults and, importantly, the impacts on global financial stability of episodes involving multiple sovereign defaults.
In this paper, we first highlight new developments in sovereign debt defaults in 2020. We provide high-level details on the 48 percent increase in aggregate sovereign debt in default, which was driven chiefly by defaults on foreign currency bonds by Venezuela, Argentina and Puerto Rico. We also describe functionality improvements to the database. We then update some key insights the database provided regarding the number, size and types of defaults. We give a historical overview of debt defaults, including the increase in problematic debt since 2018, the persistence of defaults in highly indebted poor countries, and the shift in bilateral lending toward non–Paris Club lenders.1 Finally, we provide an update on our continued efforts to include reliable estimates of domestic fiscal arrears in the database.
What’s new in 2021?
In this year’s update, our findings estimate the total value of sovereign debt in default at US$443.2 billion in 2020 (0.5 percent of world public debt), up US$143.6 billion (48 percent) from the revised total of US$299.6 billion in 2019. This outpaces the 13 percent increase in gross world public debt. The data by major creditor categories show that the increase was driven mainly by foreign currency bonds in default, which rose by US$121.2 billion. This reflected:
- new defaults by Argentina, Belize, Ecuador and Suriname
- a first-time default on foreign currency bonds by Lebanon
- a greater amount of interest arrears from ongoing bond defaults by Venezuela and Puerto Rico2
Local currency debt in default increased by US$0.9 billion. This was due mainly to Iraq’s restructuring of its short-term debt into debt with longer-term maturities and lower coupon rates.
Defaults affecting official creditors, notably the Paris Club, China and other bilateral lenders, also increased.3 Their loans accounted for US$19.4 billion of the global increase, with the Debt Service Suspension Initiative (DSSI) playing a relatively modest role.4 The values of defaulted debt in other creditor categories registered smaller changes.
Regarding our treatment of countries that participated in the DSSI, in the 2020 database we include debt service deferrals by bilateral official creditors for sovereigns that the International Monetary Fund (IMF) or the World Bank considers to be already in or at high risk of debt distress. The suspension period for debt service payments was originally set to run from May through December 2020 but was later extended through December 2021. Participation in the program by debtor sovereigns is voluntary, and the debt relief provided is intended to be net-present-value neutral. However, our reason for including in the database debt service payments suspended under the DSSI is that without the DSSI, many of these vulnerable sovereigns, some already with other debt arrears, would likely have sought debt relief. Total DSSI debt service deferrals included in the database amount to US$4.7 billion, about 1 percent of the total stock of debt in default we identified globally.
Some of the changes in this update are:
- additional data for defaults on China’s official loans since 2000
- updated annual data (where available) for each country’s total central government debt
- minor revisions of country and aggregate default data for 1960–2019
- data, by country and globally, on domestic arrears since 2005, with the most comprehensive data in the years 2018–20 (see the discussion of domestic arrears)
We also updated two tabs at the bottom of the main database spreadsheet: DATA provides a downloadable format for the global and country default data, and DEBTOTAL provides country data on total government debt stocks. The previously included DOMARS tab is not included in this year’s update because the domestic arrears data are now incorporated under the first tab.
Finally, all data are now also downloadable in the CSV, JSON and XML formats.
- 1. The permanent members of the Paris Club are Australia, Austria, Belgium, Brazil, Canada, Denmark, Finland, France, Germany, Ireland, Israel, Italy, Japan, Korea, the Netherlands, Norway, Russia, Spain, Sweden, Switzerland, the United Kingdom and the United States. For more information, see the Paris Club website.[←]
- 2. Smaller defaults involve not-yet-completed exchanges of old Argentine defaulted bonds and non-performing bonds issued by Nauru and Zimbabwe.[←]
- 3. These creditor categories exclude the International Monetary Fund, the International Bank for Reconstruction and Development and the International Development Association.[←]
- 4. In response to the global COVID-19 economic and financial shock, in 2020 the G20—in concert with the International Monetary Fund and the World Bank—launched the DSSI, offering temporary relief on debt service payments owed to bilateral official creditors by 73 low-income countries. The G20 also asked private creditors to participate on comparable terms but was rebuffed. For more information about the DSSI, see World Bank Group (2021).[←]