Published On 31 May 202331 May 2023
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1 Jun 2023
04:05 AM (GMT)
Global debt currently stands at $305 trillion, $45 trillion higher than before the COVID-19 pandemic, according to the Institute of International Finance (IIF) – a global association of the financial industry.
Global debt is the total amount of money owed by corporations, governments and individuals around the world. Of the $305 trillion of debt, corporations account for $161.7 trillion (53 percent), governments owe $85.7 trillion (28 percent) and individuals comprise $57.6 trillion (19 percent).
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The IIF predicts that global debt will continue to rise as government borrowing remains high, affected by factors such as ageing populations, geopolitical tensions, increased costs of healthcare and disparities in climate finance.
Which countries have the most debt?
Government debt represents the outstanding financial liabilities of a country, made up of different categories such as loans and debt securities.
The IIF’s Global Debt Monitor covers 21 mature market economies including the eurozone as well as 30 emerging market countries.
The United States has the world’s highest national debt with $30.1 trillion owed to creditors as of the first quarter of 2023. Washington’s debt now stands at $31.4 trillion, raising further concerns about US government spending and borrowing costs.
To put that in context, the US owes as much money as the next four countries with the highest debt including China ($14 trillion), Japan ($10.2 trillion), France ($3.1 trillion) and Italy ($2.9 trillion).
The chart below ranks government debt around the world.
Which countries have enough money to pay back debts?
Countries with high levels of debt may offset their payments if their gross domestic product (GDP) – a measure of the total value of the goods and services a country produces – is higher than their national debt.
A government’s debt-to-GDP ratio, which compares the size of a country’s debt with its economy, is one indicator of a government’s financial sustainability. Any value greater than 100 percent indicates a country is spending more than it is making.
According to IIF, global governmental debt-to-GDP stands at 95.5 percent.
Japan, the world’s third largest economy, has the highest debt-to-GDP ratio at 239 percent. Tokyo’s high debt-to-GDP ratio can be partly attributed to its ageing population and social welfare costs.
Greece has the second highest debt-to-GDP ratio at 197 percent, followed by Singapore (165 percent), Italy (135 percent), and the US (116 percent).
What is the US debt ceiling?
The debt ceiling is the maximum amount of money the government can borrow. On January 19, the US hit its borrowing limit of $31.4 trillion. Since then, the Treasury has implemented a number of measures to avoid failing to pay back its legal obligations, known as a default.
A US default would likely push the country into a major recession, shake the world economy and lead to a spike in unemployment.
On May 28, after weeks of negotiations, US President Joe Biden and Republican House Speaker Kevin McCarthy, reached a tentative deal to raise the debt ceiling for two years while capping some spending.
After calling for a recorded vote, the House of Representatives voted to advance the bill 314 – 117 in a late night sitting on Wednesday.
FAQs
According to the International Monetary Fund's (IMF) measure of central government debt, the U.S. federal government is among the most indebted governments in the world. As of 2021 (the latest available data), federal debt reached 115 percent of GDP, ranking 16th highest out of 164 countries for which the IMF has data.
How does U.S. debt rank compared with the rest of the world? ›
The United States has the world's largest national economy but comes in second for most indebted country. The U.S.'s steadily rising debt-to-GDP ratio hit 121.38% in 2022, making it the third-highest in our study.
Is the U.S. debt larger than the economy? ›
The national debt is currently almost the same size as the entire U.S. economy, which is roughly $27.3 trillion, according to a Council on Foreign Relations report, and is on track to double within the next thirty years.
How is the US the richest country with so much debt? ›
How can the US be a rich country if it has such a large trade deficit? The U.S. became a rich country largely because of its trade deficit. Trade deficits exist because there is a capital surplus: more money is flowing in as investment than is flowing out as investment.
Is the US in the most debt? ›
The United States has the largest external debt in the world. The total number of U.S. Treasury securities held by foreign entities in December 2021 was $7.7 trillion, up from $7.1 trillion in December 2020.
What country is #1 in debt? ›
Japan has the highest percentage of national debt in the world at 259.43% of its annual GDP.
What is the U.S. debt compared to other countries? ›
Debt-to-GDP Ratio for Advanced Economies in 2023
| Economy by Gross Debt | % of GDP (2023) |
|---|
| 🇺🇸 United States* | 123% |
| 🇫🇷 France | 110% |
| 🇵🇹 Portugal | 108% |
| 🇪🇸 Spain | 107% |
17 more rowsDec 11, 2023
As of 2023, the United States' debt-to-GDP ratio is among the highest in the developed world, behind only Japan and Italy. However, the United States has long been the world's largest economy, with no record of defaulting on its debt. Moreover, the U.S. dollar has been the world's reserve currency since the 1940s.
Can the US ever get out of debt? ›
Under current policy, the United States has about 20 years for corrective action after which no amount of future tax increases or spending cuts could avoid the government defaulting on its debt whether explicitly or implicitly (i.e., debt monetization producing significant inflation).
Can the US ever pay its debt? ›
Thus, debt is continually paid down and new debt incurred, to be paid down by creation of new debt, ad infinitum. If total indebtedness as a percentage of the national economy does not grow, this can continue forever.
Answer and Explanation:
If the U.S. was to pay off their debt ultimately, there is not much that would happen. Paying off the debt implies that the government will now focus on using the revenue collected primarily from taxes to fund its activities.
What country owes US money? ›
With a debt of $290.5 billion, Switzerland ranks as one of the top countries that owe the US money. Investors in Switzerland have also increased their holdings of US debt. The country's other main creditors include countries such as Germany and France.
Why can't the US pay off its debt? ›
One of the main culprits is consistently overspending. When the federal government spends more than its budget, it creates a deficit. In the fiscal year of 2023, it spent about $381 billion more than it collected in revenues.
What states are debt free? ›
The least indebted state is Oklahoma, according to the report, followed by Iowa and a tie for third with New Hampshire and Nebraska. The fifth best state in the category is Ohio. The next five best states, from best to worst, are Wyoming, Indiana, and Wisconsin, with Vermont and South Dakota tied in their ranking.
Is the US still owed money for WWII? ›
The case of debts arising from World War II is somewhat less complicated. At this time only four countries, discussed below, owe the U.S. government debts of any size arising from World War II programs to aid our allies. Other countries have paid their debts in full.
Is China's debt higher than the US? ›
Debt as a share of GDP has risen to about the same level as in the United States, while in dollar terms China's total debt ($47.5 trillion) is still markedly below that of the United States (close to $70 trillion). As for non-financial corporate debt, China's 28 percent share is the largest in the world.
Why is the U.S. debt so high compared to other countries? ›
One of the main culprits is consistently overspending. When the federal government spends more than its budget, it creates a deficit. In the fiscal year of 2023, it spent about $381 billion more than it collected in revenues. To pay that deficit, the government borrows money.
Does the US have more assets than debt? ›
The US has more assets than liabilities,1 and much of its debt is domestically owned.
What country has the lowest debt? ›
Countries with the Lowest National Debt
- Brunei. 3.2%
- Afghanistan. 7.8%
- Kuwait. 11.5%
- Democratic Republic of Congo. 15.2%
- Eswatini. 15.5%
- Palestine. 16.4%
- Russia. 17.8%
Nearly every year, the government spends more than it collects in taxes and other revenue, resulting in a deficit. (The debt ceiling, set by Congress, caps how much the U.S. can borrow to pay for its remaining bills.) The national debt, now at a historic high, is the buildup of its deficits over time.
