Public debt is the total amount of money owed by the government to creditors. It is usually presented as a percentage of gross domestic product (GDP). Some advanced economies have followed a particularly dangerous trajectory of indebtedness in recent years.

Author: Luca Ventura
Project Coordinator: B Pham

Governments spend money on health care, education, infrastructure, defense activities and a plethora of other services and goods. But why do governments have to borrow money, especially those of the richest nations? For the very simple reason that things do not always go as planned. 

Sometimes tax revenues are less than predicted, and by borrowing a government can cover the temporary shortfall without cutting back on spending. Sometimes the shortfall is not temporary and the government is running a structural deficit (that happens frequently when in a given country the population is aging and pensions and health care spending rises in relation to fiscal revenues and GDP growth). Borrowing money is often not particularly expensive: when interest rates are low and the country is going through a recession or an economic slowdown it can be more desirable to borrow than raise taxes. 

The key to government debt is that a government must be able to run a primary surplus (the excess of tax revenues over program spending) sufficient to pay back what was borrowed by a set deadline. Public debt, also called “government debt” or “national debt,” includes money owed by the government to creditors within the country (domestic, or internal debt) as well as to international creditors (foreign, or external debt).

Debt can generate future growth, but fiscal discipline is crucial: persistently running deficits entails that at some point the default point will be reached—not considering that even when default is avoided, the snowballing cost of financing debt becomes an unaffordable burden over the shoulders of future generations. 

The high level of debt in many countries in the Eurozone amplified and deepened the 2008 economic crisis: painful austerity measures and various structural reforms had to be implemented in order to stabilize fiscal imbalances. Greece famously defaulted on its external-sovereign debt obligations and had to be bailed out through rescue loans and debt relief. 

A decade after the debt crisis, one would assume that governments have learned from these mistakes. Alas, data from both the OECD and the IMF prove otherwise. Since then, sovereign debt has increased in many developed economies. More alarmingly, the IMF has warned that out 59 low-income developing countries 24 are now either in a debt crisis or at high risk of falling into one. If that happens, as always, the most vulnerable citizens will be the first to suffer. 

Sovereign debt across the OECD area has been rising significantly since the global financial crisis, albeit at a slower pace in recent years compared to the period 2008-2012. Looking ahead, member governments are estimated to borrow approximately $10.5 trillion from the markets during 2018, similar to 2017. Overall, their total debt is expected to increase from $43.6 trillion in 2017 to around $45.0 trillion in 2018, a figure that in 2008 stood at just $25 trillion.

This pattern reflects the continued expansionary stance of fiscal policy in major developed countries in recent years. Low-interest rates and stable market conditions, the OECD's Sovereign Borrowing Outlook 2018 reads, "have created a buoyant funding environment for sovereign issuers." This, in turn, has enabled governments to finance borrowing requirements at low cost. 

In the period 2012-2017, the document says, while some countries have managed to put their debt trajectory back on a sustainable path, most have been on a borrowing spree. "In the former group, the Czech Republic, Denmark, Iceland and New Zealand successfully brought their respective debt-to-GDP ratios down to—or closer to—pre-crisis levels without blocking economic recovery. In contrast, debt burdens have continued to build up further during the past five years in some countries, including: Australia, Chile, France, Italy, Portugal, Slovenia, Spain, and the United States—in some cases even above 100% of GDP."

As a consequence, the debt burden in the so-called "rich nations’ club"  is expected to maintain elevated levels in the long-term—the OECD says—"primarily due to the increasing refinancing burden from maturing debt combined with continued budget deficits in most countries."

Moreover, during the past decade, many nations’ credit ratings have fallen as their debt levels were rising, thus increasing the borrowing cost on debt. Down the road, credit agencies have warned, these higher interest rates are set to pose further fiscal challenges for governments.

Since the global financial crisis, the IMF has reiterated on many occasions, sovereign debt ratios in both advanced and emerging economies have grown to near record highs. As monetary conditions tighten across the world, the burden of debt is set to grow even more.  

But how can a country like Japan sustain debt consistently above 200% of GDP, while in 2015 Ukraine defaulted when its debt was 30% of the GDP? While the size of the debt matters, the ability to make the payments is even more important. Most of Japan's debt is internal: whereas many other countries owe mostly to foreign creditors, the country’s debt is held by its own citizen, diminishing greatly the risk of defaulting 

When debt is controlled by foreigner creditors, as when Ukraine defaulted on $3 billion in bonds due to Russia, severe tensions might arise (or persist: Ukraine and Russia have been at unofficially at war in eastern Ukraine since 2014). 

Over the past decade, the IMF noted, emerging markets have been responsible for the largest share of the increase in debt, with China leading the way. In the developed world, after the financial crisis, debt ratios have been increasing or declining at a slower pace than slower pace than deemed healthy, with Ireland and Denmark improving the most in the Eurozone. The U.S., where debt to GDP is estimated at 106% in 2018, is projected to jump to 116% in 2023.


Percentage of Public Debt to GDP

Country 2012 2013 2014 2015 2016 2017 2018
Afghanistan 6.769 6.914 8.7 9.133 7.823 7.004 6.802
Albania 62.144 70.391 71.992 73.716 73.187 71.782 71.046
Algeria 9.332 7.601 7.673 8.747 20.44 27.455 32.881
Angola 26.691 33.149 39.81 57.093 75.253 64.985 80.524
Antigua and Barbuda 86.666 94.869 102.092 98.224 86.215 86.823 62.704
Argentina 38.949 41.689 43.587 55.079 54.955 57.576 62.704
Aruba 67.62 74.045 81.586 81.326 84.677 86.042 86.645
Australia 27.773 30.726 34.148 37.836 40.632 40.807 40.513
Austria 81.611 81.011 83.799 84.346 83.556 78.55 74.237
Azerbaijan 13.75 12.646 14.393 34.994 50.711 54.084 48.35
The Bahamas 37.589 43.933 47.813 49.56 50.482 54.582 54.493
Bahrain 36.213 43.945 44.397 66.02 81.35 88.504 88.417
Bangladesh 36.221 35.82 35.273 33.681 33.331 33.098 33.36
Barbados 123.672 135.161 139.174 146.697 149.122 157.33 123.622
Belarus 36.946 36.859 38.791 53.007 53.482 53.437 55.923
Belgium 104.334 105.452 107.015 106.099 106.03 103.423 101.195
Belize 78.627 78.916 77.347 80.701 95.867 99.023 97.509
Benin 26.705 25.288 30.452 42.425 49.678 54.552 56.809
Bhutan 76.264 100.329 96.234 95.675 114.2 106.313 102.72
Bolivia 35.394 36.097 37.016 39.797 44.864 48.963 50.648
Bosnia and Herzegovina 43.45 44.582 45.038 45.531 44.081 39.459 38.289
Botswana 19.154 17.396 17.346 17.19 15.604 14.037 13.194
Brazil 62.187 60.197 62.307 72.547 78.43 83.973 88.443
Brunei Darussalam 2.101 2.209 3.231 2.953 3.005 2.825 2.399
Bulgaira 16.667 17.183 26.427 25.645 27.357 23.906 23.321
Burkina Faso 28.184 28.791 30.387 35.767 38.266 38.115 41.191
Burundi 41.431 36.106 35.772 45.263 48.42 51.712 58.44
Cabo Verde 91.111 102.49 115.924 126.033 127.839 125.839 129.871
Cambodia 31.534 31.61 31.841 30.947 29.124 30.377 31.746
Cameroon 15.412 18.212 21.534 31.981 32.517 36.931 36.866
Canada 84.84 85.789 84.96 90.547 91.147 89.727 87.262
Central African Republic 23.518 38.532 69.162 63.995 55.981 52.854 46.867
Chad

28.772

30.519 41.545 43.766 52.408 52.496 49.234
Chile 11.945 12.730 14.955 17.272 21.049 23.597 24.759
China 34.269 36.997 39.92 41.066 44.177 46.96 50.104
Colombia 33.998 37.617 43.319 50.419 49.971 49.354 48.695
Comoros 42.576 18.221 21.683 23.871 27.674 32.373 28.991
Democratic Republic of the Congo 23.169 19.119 16.803 16.787 19.346 18.108 16.215
Republic of Congo 45.656 50.029 60.329 112.146 128.654 130.795 100.681
Costa Roca 34.221 35.837 38.407 40.878 44.925 48.916 53.671
CUte d'Ivoire 45.041 43.36 44.79 47.266 46.975 46.957 48.765
Croatia 70.598 81.631 85.709 85.267 82.276 77.847 74.249
Cyprus 79.175 102.084 107.476 107.498 106.578 97.454 112.302
Czech Republic 44.47 44.909 42.169 39.955 36.806 34.669 33.166
Denmark 44.894 44.046 44.27 39.926 37.868 35.294 34.739
Djibouti 43.302 42.718 38.811 33.717 33.677 31.824 29.876
Dominicana 72.367 80.147 78.718 75.265 71.748 82.71 87.769
Dominican Republic 29.999 33.896 33.289 32.71 34.626 37.202 36.51
Ecuador 17.496 20.031 27.075 33.798 43.166 45.363 48.374
Egypt 73.8 84.021 85.127 88.458 96.841 103.04 92.519
El Salvador 61.47 60.955 63.063 65.081 66.448 67.942 67.875
Equatorial Guinea 7.097 6.272 12.56 33.607 43.338 37.409 37.292
Eritrea 128.327 127.477 128.674 132.498 132.81 131.244 129.41
Estonia 9.733 10.161 10.667 10.001 9.417 8.98 8.802
Eswatini 14.55 14.835 14.002 18.789 25.465 28.361 37.642
Ethiopia 37.656 42.875 46.802 54.009 53.236 54.197 59.494
Fiji 51.621 49.664 48.214 46.205 47.465 48.864 49.761
Finland 53.91 56.458 60.2 63.537 62.949 61.332 60.516
France 90.602 93.412 94.889 95.582 96.587 96.801 96.688
Gabon 21.442 31.113 34.063 44.703 64.199 62.685 58.354
The Gambia 49.214 58.609 69.415 68.574 82.349 88.035 82.755
Georgia 34.83 34.663 35.59 41.446 44.414 44.86 43.887
Germany 79.877 77.506 74.594 70.904 67.9 63.852 59.786
Ghana 47.941 57.205 70.157 72.211 73.405 71.837 71.194
Greece 159.586 177.946 180.212 178.779 183.453 181.779 188.064
Grenada 103.335 108.059 101.764 90.1 81.99 70.372 64.63
Guatemala 24.328 24.619 24.283 24.206 24.515 24.715 25.077
Guinea 27.185 33.967 35.09 41.938 41.776 37.946 40.378
Guinea-Bissau 46.531 48.901 57.433 54.602 57.898 53.873 55.311
Guyana 63.494 57.982 51.878 50.101 50.737 52.195 56.984
Haiti 16.346 21.46 26.307 30.243 33.884 31.061 33.29
Honduras 29.761 37.692 37.522 37.433 38.499 39.479 39.717
Hong Kong SAR 0.545 0.52 0.065 0.062 0.059 0.055 0.052
Hungary 78.373 77.148 76.63 76.73 75.58 73.58 71.27
Iceland 89.369 81.789 79.727 65.955 51.697 39.958 37.022
India 69.123 68.548 67.811 69.962 69.516 71.176 69.554
Indonesia 22.96 24.847 24.682 27.46 28.335 28.768 29.83
Islamic Republic of Iran 12.126 10.715 11.822 38.415 47.47 39.53 44.213
Iraq 34.782 31.987 32.862 59.883 66.028 59.726 51.771
Ireland 119.925 119.817 104.265 76.931 73.556 68.555 66.577
Israel 68.421 67.173 66.094 64.05 62.286 60.928 61.494
Italy 123.36 129.02 131.785 131.511 131.041 131.808 130.281
Jamaica 145.011 140.462 139.68 121.273 113.603 101.027 97.365
Japan 229.008 232.469 236.069 231.261 235.589 237.647 238.225
Jordan 80.718 86.678 89.049 93.391 95.073 95.855 95.966
Kazakhstan 12.125 12.603 14.496 21.882 19.677 20.792 17.799
Kenya 43.88 43.96 48.562 51.466 53.202 54.217 56.101
Kiribati 7.441 8.3 8.739 19.916 22.879 26.302 29.836
Korea 32.201 25.39 37.314 39.526 39.889 39.529 40.36
Kosovo 15.992 15.985 16.887 18.745 19.435 21.187 21.92
Kuwait 3.602 3.092 3.429 4.653 9.833 20.584 18.793
Kyrgyz Republic 48.975 46.191 52.253 64.894 55.907 55.952 54.961
Lao P.D.R. 55.238 54.349 58.581 58.093 58.449 63.582 66.736
Latvia 36.746 35.837 38.488 34.906 37.391 36.315 35.005
Lebanon 130.96 136.594 137.175 140.894 145.454 146.794 149.992
Lesotho 36.991 38.545 38.317 42.191 36.239 33.684 39.3
Liberia 17.591 17.912 21.673 25.873 28.296 34.444 40.065
Lithuania 39.774 38.759 40.541 42.589 40.107 39.734 36.956
Luxembourg 21.72 23.685 22.663 21.969 20.798 22.95 22.804
FYR Macedonia 33.662 33.969 38.015 38.104 39.538 39.254 41.479
Madagascar 33.028 33.891 34.651 35.533 38.402 35.968 35.1
Malawi 43.918 59.251 55.24 61.092 20.279 56.156 57.853
Malaysia 54.552 56.447 56.16 57.877 56.183 54.123 55.101
Maldives 57.124 55.981 55.065 54.699 61.696 63.911 65.447
Mali 25.39 26.368 27.358 30.667 35.952 35.446 36.921
Malta 67.733 68.396 63.655 58.643 56.271 50.653 45.084
Marshall Islands 36.369 32.323 35.108 34.309 30.042 25.508 23.404
Mauritania 73.534 70.584 80.361 98.61 100.011 96.574 97.518
Mauritius 56.6 59.103 62.033 65.357 66.052 63.977 63.946
Mexico 42.65 45.899 48.882 52.834 56.762 54.332 53.815
Micronesia 27.072 27.717 28.205 25.749 25.293 24.47 22.415
Moldova 26.363 25.231 30.738 38.248 25.789 31.513 32.46
Montenegro 56.87 58.654 63.36 68.758 66.387 67.199 74.222
Morocco 56.532 61.727 63.339 63.688 64.858 65.132 64.412
Mozambique 40.098 53.125 62.371 88.114 121.554 102.076 112.91
Myanmar 40.689 33.209 29.911 34.536 35.747 33.636 33.197
Nambia 23.743 24.185 24.689 38.625 39.459 41.287 47.159
Nauru 119.623 110.384 78.968 77.717 64.955 61.969 61.537
Nepal 34.256 32.172 28.175 25.581 27.863 26.402 29.746
Netherlands 65.511 67.005 67.1 63.97 61.299 56.45 53.099
New Zealand 35.724 34.606 34.234 34.3 33.455 31.696 30.357
Nicaragua 27.852 28.835 28.69 29.245 31.154 33.340 37.501
Niger 26.868 26.262 31.976 41.038 45.24 45.253 46.318
Nigeria 12.744 12.943 13.072 15.982 19.619 21.788 24.765
Norway 30.16 30.426 28.173 32.953 36.358 36.462 36.358
Oman 4.856 5.029 4.925 15.47 32.483 46.903 48.698
Pakistan 63.243 63.863 63.472 63.324 67.633 66.962 72.535
Panama 34.252 33.571 35.588 37.231 37.358 37.798 37.415
Papa New Geinea 19.124 24.89 27.07 31.446 36.941 36.852 35.709
Paraguay 11.937 12.765 15.14 18.096 18.925 19.452 20.351
Peru 21.166 19.96 20.653 24.031 24.429 25.429 26.389
Philippines 47.852 45.741 42.064 41.491 39.026 39.971 39.786
Poland 53.716 55.692 50.253 51.122 54.162 50.622 49.988
Portugal 126.222 129.039 130.593 128.77 129.901 125.682 120.825
Puerto Rico 53.732 52.308 54.546 52.736 50.058 51.644 55.375
Qatar 32.118 30.883 24.912 35.547 46.707 53.767 53.402
Romania 37.738 39.026 40.494 39.352 38.762 36.778 37.185
Russia 11.908 13.092 16.038 16.325 16.051 15.53 15.33
Rwanda 19.97 26.742 29.131 33.354 37.287 40.456 42.604
Samoa 49.162 53.604 54.404 57.78 52.581 49.099 50.159
San Marino 15.834 21.494 19.632 20.331 22.503 24.132 59.205
Sao Tome and Principe 81.037 71.141 69.457 86.544 93.062 88.366 76.89
Saudi Arabia 3.036 2.146 1.562 5.8 13.093 17.206 19.39
Senegal 34.172 36.769 42.366 44.509 47.809 48.333 50.399
Serbia 57.87 61.14 71.945 76.016 73.069 62.538 58.81
Seychelles 80.069 68.199 72.731 67.415 69.06 63.637 59.883
Sierra Leone 36.765 30.545 34.966 45.267 54.883 63.937 79.164
Singapore 105.082 101.487 96.641 100.5 106.774 111.105 112.85
Slovak Republic 52.165 54.739 53.547 52.341 51.819 50.864 49.236
Slovenia 53.786 70.379 80.34 82.622 78.562 73.617 69.654
Solomon Islands 16.957 15.275 11.919 10.148 7.907 9.404 12.411
South Africa 41 44.1 46.985 49.313 51.566 53.04 55.728
South Sudan 8.906 17.587 38.327 69.283 86.62 62.725 43.684
Spain 85.737 95.451 100.367 99.439 98.988 98.364 97.154
Sri Lanka 69.609 71.776 72.217 78.487 79.609 79.102 78.004
St. Kitts and Nevis 137.917 101.062 75.228 66.066 61.509 62.891 63.591
St. Lucia 67.203 69.548 70.703 67.815 69.21 70.65 71.828
St. Vincent and the Grenadines 72.457 74.973 79.421 79.356 82.826 73.804 72.979
Sudan 96.983 93.079 83.222 82.316 99.521 121.597 167.548
Suriname 21.449 29.561 26.343 43.026 75.845 69.302 62.52
Sweden 38.1 40.729 45.477 44.19 42.32 40.838 37.911
Switzerland 43.668 42.914 42.971 43.007 41.843 41.815 40.155
Taiwan, Province of China 39.182 38.999 37.83 36.553 36.232 35.653 34.353
Tajikistan 32.435 29.206 27.546 34.288 42.023 50.423 52.729
Tanzania 29.151 30.901 33.795 37.24 37.965 36.972 37.37
Thailand 41.926 42.192 43.344 42.549 41.805 41.882 41.925
Timor-Leste N/A 1.113 0.584 1.493 3.062 3.839 N/A
Togo 47.226 55.708 60.447 72.23 81.585 75.725 75.715
Trinidad and Tobago 24.779 25.078 23.871 28.023 37.016 41.777 42.652
Tunisia 47.676 46.845 51.529 55.429 62.271 70.331 70.497
Turkey 32.724 31.382 28.769 27.643 28.311 28.261 32.332
Turkmenistan 18.066 19.985 16.813 21.816 24.068 28.82 30.865
Tuvalu 27.492 27.286 64.465 56.903 47.223 36.972 27.597
Uganda 24.609 27.66 30.798 33.484 37.43 40.035 42.871
Ukraine 37.542 40.519 70.317 79.331 81.174 70.997 70.481
United Arab Emirates 16.986 15.759 15.539 19.69 20.217 19.747 17.81
United Kingdom 84.088 85.15 87.014 87.876 87.909 87.525 87.38
United States 103.338 104.882 104.576 104.79 106.838 105.199 106.1414
Uruguay 58.01 60.154 61.404 64.584 61.571 65.727 68.121
Uzbekistan 11.189 12.048 11.701 9.205 10.462 24.259 19.224
Vanuatu 21.193 20.386 24.094 39.027 46.059 48.412 51.3
Venezuela 58.092 72.269 63.489 31.927 31.299 38.956 159.023
Vietnam 48.39 51.971 55.011 57.398 59.942 58.489 57.814
Yemen 47.312 48.2 48.722 55.178 68.113 74.467 62.477
Zambia 25.425 27.088 36.137 62.26 60.668 63.102 70.883
Zimbabwe 45.286 48.347 49.604 51.926 69.92 82.225 81.884

N/A—Not available.

Source: IMF World Economic Outlook database, October 2018.