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National Debt by Country
What is national debt?
National debt is the amount of money owed by a national government. This is different to public debt, which include money owed by all levels of government and also publicly owned institutions.
Which Country Has The Largest National Debt?
According to the IMF, Japan is the most indebted country in the world in terms of a debt to GDP ratio. Debt to GDP is expressed as a percentage. GDP is a county’s annual income and it is usually expected that the debt of a nation should be less than 100 per cent of that GDP figure. However, in many countries, the national debt is higher than the GDP.
Here are the ten most indebted nations on earth:
Which Countries Have No National Debt?
Does national debt matter? Is it an indication of financial stability? Not always. In the case of these three “debt free” countries, their lack of a national debt is most likely just because they are unwilling to report to the IMF. Another instance where low national debt might be a bad sign is if a country’s economy is so underdeveloped that nobody would want to lend to them.
Here is a list of the ten least indebted nations in the world that actually report their figures to the IMF:
|2||Hong Kong SAR||0.1|
|6||Congo, Dem. Rep. of the||14.5|
|10||United Arab Emirates||19|
Having a large national debt doesn’t always discourage buyers of bonds. For example, the United States has a debt to GDP ratio of 108% and a lot of people want to buy US Treasury bonds. However, Turkey has a debt to GDP ratio of only 2.8%, but very few are in the queue to buy that country’s government bonds.
Some countries, such as the USA are always considered a good place to invest and the government bonds of those countries are always in high demand. As an example, about 28% of all US government debt is held by foreign buyers. The top five nations that buy US government debt are shown in the table below.
|Rank||Country||Holdings in $ billion|
Reasons for national debt
The bottom line is that government borrowing is a tax on unborn generations. However, loan-funded government investment in infrastructure will reap economic benefits for generations to come.
Debt to fund infrastructure projects is called “capital expenditure” and is generally encouraged by traders because it is likely to generate an income directly, or raise the productivity and GDP of the nation.
Examples of infrastructure spending that improve an economy are:
- The development of transport infrastructure, such as motorways and railways
- Investment in universities to create more educational institutions or crate centers of excellence from existing establishments.
- Improvements in communication infrastructure, such as a fibre optic backbone to expand the nation’s internet bandwidth availability and speed.
If you are thinking of investing in a country, or if you are considering moving there, investigating the national debt of that place and how the government spends the money it raises is a good starting point for your research. National debt is one of many economic indicators that interplay to create a judgement on a country’s prospects for success.
Debt vs deficit
When a government spends more than its revenue, it runs a budget deficit that year. It has to fill the funding gap with debt. Politicians attract votes by promising large sections of the population more payments from the government than they pay in through tax. They don’t want to frighten off those people who pay in more than they take out, and so they try to avoid increasing tax levels. This situation creates an annual deficit that is unlikely to ever end until the accumulated debt becomes unsustainable and the government’s finances collapse.
Other governments only borrow to stimulate the economy during a recession, calculating that they can repay that debt once expansion returns and produces a government budget surplus.
If the country and its government has a good reputation, the instruments that it issues in order to raise debt to cover a deficit represent a safe investment. Governments that run constant deficits to buy votes find it difficult to attract loans.
Why is National Debt Bad?
If a government increases its national debt to a level that the market thinks is too high, it will have to increase the interest it pay in order to find lenders. With the backstop of a high return from a safe source, banks do not need to lend to businesses to make a profit. When banks are less interested in offering loans, they raise interest rates for all borrowers. High interest on loans increases business costs and the return on investment that is funded on debt reduces. Businesses cease to expand and unemployment rises.
When interest rates rise, the cost of mortgages on properties rise and so the cost of rents also rise. The increase in the cost of premises forces businesses to increase their prices in order to remain in profit. This in turn increases the cost of living and causes inflation without economic growth. A workforce faced with an increased cost of living will demand higher wages. This increases business costs and the price of goods, stoking inflation further.
Eventually, businesses will be squeezed to the point of bankruptcy or move their production abroad to save their profitability. So,high national debt can have a serious impact on the economic growth of a country.
How is national debt rated?
Ratings agencies score governments on a range of metrics. Countries with higher ratings can offer lower interest rates on their bonds because they are considered to be safe investments. When investigating a country’s economy, the national debt is one metric that ratings agencies note. They also look at the debt-to GDP ratio, the national debt per head of population, the interest rates on government debt and the average bank lending rate.
A country’s rating is also influenced by the rate of growth in the population, the distribution of income in the country, the levels of private debt, the value of the housing stock, the rate of home ownership, the country’s trade balance, the annual inward investment in a country, and GDP growth.
The above factors show whether the economy is likely to grow. A growing economy can bear the burden of tax that is needed to comfortably repay national debt. This knowledge in the financial community enables governments to lower the interest rates that it offers on its debt and reduce the cost of financing deficits.
Thanks to economic indicators, you can work out whether a country’s national debt will trigger a virtuous cycle of investment and expansion, or a destructive debt spiral.
Frequently Asked Questions
Where Does Our National Debt Data Come From?
Over 90% of our data is directly obtained from official government agencies and central banks. When this is not possible, we use data from:-
This raw data is then processed through our algorithms which use, among other variables, the average 10 year interest rate paid on the debt to accurately calculate the current debt amount at the time you are viewing the debt clock. We believe our calculations are correct working from the data that we have collected.
We update our exchange rates using data from the European Central Bank.
Media & Publication Of Our National Debt Data
You may use our published figures free of charge, as long as you credit https://commodity.com with a citation and link to the site. Please send us an email to notify us, too!
How Are Debt Clocks Calculated?
We'll use the United Kingdom as an example:
- We obtain the latest data regarding the country's national debt and the 10 year average interest rate they pay on it.
Data from UK Treasury
National Debt: $1,717,879,000,000 10yr Interest Rate: 2.50
- Using these two figures we can then calculate how much the debt increases per year and subsequently per second.
Increase per Year: $42,946,975,000 Increase per Second: $1,362
- We then work out the time difference between when the data was obtained and when the debt clock is being viewed by a visitor.
Time Difference = Time and Date of Visit – Time and Date of Official Figure
- The current debt is then calculated by adding the increase over this time to the official figure.
Current National Debt = Official Figure + (Time Difference in Seconds x Increase per Second)
- The debt clock then updates every two seconds, increasing according to the figures calculated in step 2.
Current National Debt = (Current National Debt + (Increase per Second x 2)) x Exchange Rate
Who Runs This Site?
We have no secret agenda. We are not affiliated, connected, sponsored or even friendly to any political party, pressure/lobby group, or steering party in the world. Our only aim is to provide clear and up to date information about the ongoing debt crisis.
While we do our best to present accurate data, we offer no guarantees or warranties that the data we present is necessarily accurate.