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Jorge, owner of Locuras Shoe Store, is seen in his shop as it remains closed due to government-ordered lockdown July 01, 2020 in Buenos Aires, Argentina.Amilcar Orfali/Getty Images

Global debt surged to a record $258 trillion in the first quarter of 2020 as economies around the world shut down to contain the coronavirus pandemic, and debt levels are continuing to rise, the Institute for International Finance said on Thursday in a report.

The IIF, which represents global banks and financial institutions, said the first-quarter debt-to-GDP ratio jumped by over 10 percentage points, the largest quarterly surge on record, to reach a record 331 per cent.

While the rise in debt levels was well below average quarterly gains seen from 2015 to 2019, the pace of global debt build-up by governments, companies, financial institutions and households had accelerated since March, it said.

Overall gross debt issuance hit an “eye-watering” record of $12.5 trillion in the second quarter, compared with a quarterly average of $5.5 trillion in 2019, the IIF said. It noted that 60 per cent of those issues came from governments.

“While increasing debt levels raise concerns about debt sustainability, over 92 per cent of government debt is investment-grade,” the report said.

Debt in mature markets topped 392 per cent of GDP, up from 380 per cent in 2019, with the rise in debt ratios outside the financial sector most pronounced in Canada, France, Norway and the United States. U.S. debt made up half of the total $185 trillion of debt in mature markets.

Debt-to-GDP ratios jumped to 230 per cent in emerging markets in the first quarter from 220 per cent, but the U.S. dollar value of debt fell by $700 million to $72.5 trillion, largely due to a depreciation in emerging market currencies against the U.S. dollar, the IIF said.

It said China’s debt across all sectors was on track to hit 335 per cent of GDP after increasing to 318 per cent in the first quarter from 302 per cent, the largest quarterly surge on record. About 60 per cent of the debt build-up was due to non-financial corporates, it said.

The group said some $3.7 trillion of emerging market debt would come due through the end of 2020, and was set to rise to $4 trillion in 2021.

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