Global Debt Around the World: Which Countries Have Borrowed the Most?

The level of national debts has grown rapidly around the world in recent years. Now that interest rates have also started to rise, this has caused a lot of problems or even insolvency for many countries.

Global public debt levels are projected to reach $97.1 trillion by the end of 2023, a 40 percent increase over 2019.

During the coronavirus pandemic, governments used radical measures to stimulate the labour market and the economy, with the aim of avoiding a wave of bankruptcies resulting from economic shutdowns. Since it was merely an artificial patching, and debt levels rose sharply because of it, higher interest rates have now started to bring all these problems to the fore.

The map below shows the debt levels of different countries in 2023, the data is based on International Monetary Fund (IMF) forecasts of what the debt levels will be by the end of 2023.

The US national debt has risen to $33.2 trillion, which is more than a third of the debt burden of all countries. Due to the increase in interest rates, the cost of servicing this debt has increased sharply. In the third quarter of 2023, US government interest payments rose to $981 billion on an annualised basis – for the fiscal year 2023 revenue of $4.4 trillion. This means that interest payments make up 22.1 percent of it.

You can read more about the US debt burden and interest payments here.

Japan’s Gigantic Debt Burden

The ratio of Japan’s, the third largest economy in the world, debt burden to GDP is as much as 255 percent. Such a debt burden is clearly unsustainable, but several factors have allowed Japan to postpone the problems.

First, the central bank keeps interest rates artificially low – the yield (or interest) on national debt is capped at 1 percent. This keeps interest payments artificially low, and the Bank of Japan itself has been buying massive amounts of government bonds with its own printed money. Currently, almost half of all government bonds are held by the Bank of Japan. The country has also been helped by a constant current account surplus (exports exceed imports) and the fact that most of the government bonds are in the hands of the Japanese themselves.

In this respect, the country has made itself completely dependent on low interest rates. Although the country has had problems with deflation in recent decades, any acceleration of inflation and rising interest rates would put the bond market under very strong pressure. The market is so strongly distorted that even a small increase in interest rates can bring the entire country to the brink of a deep economic crisis. In essence, it is a ticking debt bomb – currently the system still works, but it is highly dependent on several factors.

Economic Crises in Developing Countries

If Western countries have not yet been punished by investors with a sharp increase in interest rates, the situation is different in many developing countries – very high interest payments have put the countries under serious pressure.

Sudan, which is at the top of the debt burden ranking (256 percent of GDP), is in a total economic crisis. A civil war broke out in the country in the spring, due to which more than 5 million Sudanese have had to flee their homes. According to the IMF forecast, Sudan’s economy dropped by as much as 18 percent in 2023.

Inflation in Sudan has reached more than 250 percent. The agricultural sector, which is very important for the country’s economy and accounts for 40 percent of the GDP, has been hit hard. The country is also the third largest gold producer in Africa, but because of the war, the sale of gold abroad has essentially stopped.

There are many more examples around the world. Lebanon has already been insolvent since 2020, in the same year Argentina also became insolvent. Ghana declared bankruptcy in 2022 due to deepening economic crisis.

Egypt Pays Half of the Government’s Revenue in Interest

Egypt’s debt burden is lower than the UK, Japan, USA, France and Spain. Even so, they have encountered serious problems in the state finances, because currently about 45 percent of the government’s income is spent on interest payments.

Egypt’s debt burden (92.7 percent of GDP) is second only to Sudan in Africa. In terms of total debt, they are the largest debtors in Africa. Egypt pays an average of more than 15 percent interest on its national debt. Some relief is provided by annual inflation, which has risen to 37 percent, which reduces the real value of the debt.

Greece, the third most indebted country in the world, has been groaning for decades under a huge debt burden that has sharply reduced people’s living standards since the debt crisis began in 2008. In 2007, purchasing power adjusted (PPP) GDP per capita in Greece was $37,600, compared to just $31,520 the previous year.

This means that Greece has been in total decline for the past two decades, making people poorer. For example, in Estonia, the same indicator was 31,140 dollars in 2007, while in 2022 it was 37,830 dollars.

Various European aid programs have not improved the situation at all, and probably insolvency and debt cancellation would have had a better effect on the Greek economy in the long term.

Debt Burdens by Region

As you can see from the table below, North America has the highest debt burden by region. The US debt burden has risen sharply over the past decade, and so has Canada. Both countries are ranked 7th and 17th respectively in the debt burden ranking.

While Egypt has to pay more than 15 percent interest on its debt load, the US paid an average of 3 percent interest on its debt last fiscal year. If this indicator were to increase to 15 percent in the USA, interest payments would reach nearly 5 trillion dollars. This would be more than the government’s tax revenue (4.4 trillion). So low interest rates have allowed the United States to grow its debt so quickly.

In Asia, too, debt burdens have swelled rapidly. China’s debt burden is 83 percent of GDP, India’s is 81.9 percent of GDP. The largest debtor in Southeast Asia is Laos (121.7 percent of GDP) – the country borrowed huge amounts of money from China to build railways, highways and hydroelectric plants. Now there is a currency crisis in the country and inflation has reached 26 percent. In essence, Laos has reached the brink of economic collapse.

Africa has the lowest debt levels, but a large part of the debt (about 40 percent) is taken in foreign currency. This puts countries in a vulnerable position, because the debt burden and their ability to service it largely depends on exchange rates. In addition, the countries of the region have to pay much higher interest on their debts than the countries of North America or Europe.