The countries of the Organization for Economic Co-operation and Development (OECD) raised a record $ 18 trillion in 2020 by placing bonds. Borrowings are up $ 6.8 trillion since 2019, the most significant jump since the start of tracking this data, the OECD said . Borrowing helped the organization’s member countries to cover the cost of supporting households and businesses during the coronavirus pandemic.
The cost of borrowing, meanwhile, was at a record low thanks to large volumes of bond buybacks by central banks: almost 80% of government securities in 2020 were placed at less than 1% per annum (39% in 2019). At the same time, in the case of 20% of bonds sold last year, the yield was below zero, according to the OECD.
The rate of growth in the volume of bond placement in the past year was twice as high as during the global financial crisis. Large amounts of borrowing are due to the unique conditions in which the world finds itself due to the coronavirus pandemic, when unprecedented measures were required to support people and businesses.
OECD experts also note that under the current conditions, the attitude of state authorities, as well as investors and economists to the problem of budget deficits has become calmer than in the past.
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“The lesson we have learned from the financial crisis is that governments should not roll back fiscal stimulus too early,” the report says.
The OECD expects government borrowing to pick up again this year, but the growth rate will be slower than in 2020. These expectations are associated, in particular, with the package of measures to support the economy proposed by US President Joe Biden, the total volume of which is about $ 1.9 trillion.