One of the most underestimated problems in the global economy right now is the rapid increase in national debt. A lot of countries are borrowing massive amounts of money and if such debts are not managed properly, investor confidence in the countries’ abilities to sustain their economies while servicing their debt obligations may start to dwindle. The national debt is measured as a percentage of GDP, which is the total value of goods and services produced by a country in a given year
The IMF has a sustainable debt framework that recommends national debt not to exceed 40% of GDP. However, there aren’t many countries out there that have managed to maintain that level. In addition to this, it seems like bigger economies carry the world’s largest debt. It’s quite understandable though. For many investors, large economies pose relatively fewer risks compared to smaller countries. These economies also tend to be very stable. In that case, a lot of lenders would be more confident that a country like the US has the ability to repay its debt due to its large economy compared to a smaller country.
So, what are the countries with the largest amount of debt as a percentage of GDP?
Here is the full list:
- Japan - Japan is the world’s third-largest economy. However, its debt to GDP ratio is the highest at 238%.
- Greece - The national debt in Greece stands at 182% of GDP. The government there recently started a number of austerity measures to try to address this issue. Greece has also defaulted on some of the loans owed.
- Barbados - For a relatively small country, the Caribbean island of Barbados also has a staggering national debt that stands at 157% of the GDP.
- Lebanon - Lebanon’s national debt is at the moment ranking fourth at 147% of GDP. The country is also relatively smaller with a smaller economy too.
- Italy - The economic crisis in Italy over the last few years has been well documented. The country slid into recession too and its national debt is at 132% of the GDP.
- Eritrea - The small country at the Horn of Africa has a national debt to GDP ratio of 131%. Most of it is largely from Chinese banks.
- The Republic of Congo - The Republic of Congo also makes the top ten list with a national debt to GDP ratio of 131%.
- Cape Verde - Cape Verde, on the other hand, has a slightly lower percentage at 126% but it’s still way above the 40% threshold recommended by the IMF.
- Portugal - Portugal’s national debt stands at 126% of GDP.
- Sudan - Despite its oil wealth, Sudan has borrowed a lot too. As of 2018, the national debt was at 122% of the GDP.
From the list above, it’s clear to see that the issue of national debt cuts across all countries whether developed or developing. However, China has been driving much of the growth in national debt for many developing nations.