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 published datasets compiled by various public and private sector sources. It combines elements of these 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 2021 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). Regular updates of the BoC–BoE database 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:
- highlight developments in sovereign debt defaults in 2021, including high-level details on the 16% decline in the US-dollar value of sovereign debt in default from 2020 to 2021
- describe functionality improvements to the database
- update key insights regarding the number, size and types of defaults
- give a historical overview of debt defaults, their persistence in highly indebted poor countries, and the shift in bilateral lending toward non–Paris Club lenders1
- provide an update on our continued efforts to include reliable estimates of domestic fiscal arrears in the database
The 2022 edition of the database contains a number of enhancements:
- more 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 to country and aggregate default data for 1960–2020
- new data, by country and globally, on domestic arrears, most comprehensively in the years 2000 to 2021
We also updated one tab at the bottom of the main database spreadsheet: DATA provides a downloadable format for the global and country default data.
Key insights from the 2022 edition
The total value of sovereign debt in default fell, even as gross world public debt increased
We estimate the total value of sovereign debt in default at US$375.3 billion in 2021 (0.4% of world public debt). This is a decease of US$72.3 billion, or 16%, from the revised total of US$447.7 billion in 2020. By contrast, gross world public debt grew by about 10%. The reduction in sovereign debt in default was driven mainly by a decline of US$78.9 billion in foreign currency bonds in default. This decline reflects the resolution of defaults by Ecuador and Argentina on most of their bonds, which offset higher arrears on bonds by Belize, Mozambique, Nauru, Puerto Rico, Suriname, Venezuela and Zambia.
Local currency debt in default fell by US$5.2 billion. This was due mainly to the completion of Iraq’s 2020 restructuring of its short-term obligations.
The upward trend in global debt slowed in 2021, but the level remains high
According to data from the International Monetary Fund (IMF), government debt in 2021 was 98.3% of world gross domestic product (GDP), down slightly from 99.5% in 2020 but still close to its highest level since the 1950s. Moreover, the IMF’s April 2022 World Economic Outlook notes that total debt—including that of households, non-financial corporations and governments—now exceeds 250% of global GDP and is accumulating at a pace comparable to that seen in the two world wars of the 20th century. IMF staff also highlighted that even as the exceptional fiscal costs of the COVID‑19 pandemic ease, Russia’s invasion of Ukraine is dampening the global economic recovery and resulting in new fiscal pressures.2
Defaults to official creditors increased slightly overall in 2021
Paris Club loans in default fell, but loans in default from China and other bilateral lenders increased.3 In all, official creditor loans in default increased by US$14.4 billion. Changes in the values of defaulted debt in other creditor categories were less significant.
For sovereigns that participated in the Debt Service Suspension Initiative (DSSI),4 we include 2020 and 2021 debt-service deferrals by bilateral official creditors as defaults in the database for sovereigns that the IMF and the World Bank consider to be already in or at high risk of debt distress. The suspension period for debt-service payments, originally set to run from May through December 2020, was later extended through December 2021. Participation in the program by debtor sovereigns was voluntary, and the debt relief provided was intended to have a neutral effect on net present value.
We include debt-service payments suspended under the DSSI for these countries because, without the DSSI, many countries—some already with other debt arrears—would likely have sought debt relief. Total DSSI debt-service deferrals in the database in 2021 amount to US$5.7 billion, about 1.5% of the total stock of debt in default we identified globally.
- 1. The permanent members of the Paris Club are Australia, Austria, Belgium, Brazil, Canada, Denmark, Finland, France, Germany, Ireland, Israel, Italy, Japan, the Netherlands, Norway, Russia, South Korea, Spain, Sweden, Switzerland, the United Kingdom and the United States. For more information, see the Paris Club website.[←]
- 2. International Monetary Fund, “Restructuring Debt of Poorer Nations Requires More Efficient Coordination,” IMFBlog (April 7, 2022).[←]
- 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 and 2021, the G20—together with the International Monetary Fund and the World Bank—launched the DSSI. This initiative offers 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 this request was ignored. For more information about the DSSI, see World Bank Group, “Debt Service Suspension Initiative” (March 10, 2022).[←]