Top 15 Countries with the Highest External Debt-to-GDP Ratios in the World

According to Fox News on September 15, the US Treasury released new data on September 12. In it, the total overdue debt of the United States is about $24.3 trillion, including publicly held debt and $6.6 trillion in internal equity debt within the government. According to the US Treasury, internal debt includes federal trust funds, revolving funds, and special funds, as well as securities of the Federal Financing Bank.

Publicly held debt includes all 'debt held by any individual or organization that is not a federal government entity': corporations, domestic individual investors, local or state governments, the Federal Reserve, foreign investors, foreign governments, and other organizations. About one-third of the US publicly held debt is now owned by foreign holders. According to the latest report published by the US Treasury on July 18, as of the end of May, China only held $980.8 billion of US government debt, a decrease of $23 billion from April and a nearly $100 billion decrease, equivalent to 9%, year-to-date. For the first time since May 2010, China's holdings of US government debt have dropped below the $1 trillion mark. Beijing has shown a trend of reducing its ownership of US public debt since the beginning of 2021.

External Debt: $21.76 trillion

The second-largest economy in the eurozone is undergoing a recovery characterized by a 'two steps forward, one step back' pattern, according to comments from the French national statistics agency.

According to the head of the French Central Bank, the French and European economies will experience a significant decline in 2023, and there is not ruling out the possibility of entering a recession for a certain period.

“Looking ahead to 2023, I believe the pace will slow significantly due to uncertainties surrounding energy bill inflation. If divided into 3 phases, 2022 will be a period of resistance, 2023 will be a decline, and recovery may only occur in 2024,” said Villeroy de Galhau. The governor of the Central Bank of France also believes that, despite lowering the 2023 growth forecast from 2.5% to 1.4%, the French government is likely to further reduce the forecasted figure in the 2023 Budget Law, which is set to be presented to the French Parliament at the end of September. Two days ago, the French National Institute of Statistics and Economic Studies (Insee) also forecasted that the French economy will stagnate in the last quarter of 2022 and remain stagnant in the first half of 2023.

Foreign debt: $7.36 trillion

Due to the significant impact of the COVID-19 pandemic, the borrowing amount of the UK government in the first 6 months of the 2020 fiscal year (starting from April 1) was more than 6 times higher than the same period in 2019, pushing the country's public debt to a record level since 1960. In May, both the National Insurance and VAT income from taxes decreased during the coronavirus lockdown, as spending on support measures surged. This is the first time that debt has exceeded the scale of the economy since 1963, but it is not as high as the post-war peak of 258% in the 1946-1947 period.

The deficit in the first two months of the fiscal year (April and May) is estimated at £103.7 billion, more than £87 billion compared to the same period last year, another record. However, the Office for National Statistics (ONS) estimates that borrowing for the 2020-2021 fiscal year will be even 'more frightening' with £298 billion. It will be the largest deficit since World War II. Massive borrowing in the early months of 2020 has increased the total debt of the UK government to £1.95 trillion, surpassing the scale of the economy for the first time in over 50 years. Prime Minister Rishi Sunak stated that these figures show the serious impact of Covid-19 on public finances.

Foreign debt: $9.83 trillion

Due to the aftermath of the COVID-19 pandemic, the public debt ratio of Germany last year surged to a record high. Data from the Federal Statistical Office of Germany (Destatis) indicates that by the end of 2020, the public debt of the German economy reached 2,172.9 billion euros (2,580.63 billion USD), the highest level ever recorded in annual debt statistics.

According to expert Sebastian Dullien, the head of the macroeconomic research institute IMK, in the context of the COVID-19 pandemic severely affecting the economy and social life, the increase in Germany's public debt ratio is significant, but it is not a cause for concern for the leading economy in Europe. The current debt ratio is still lower than the debt ratio after the financial crisis in 2012 and is expected to decrease rapidly from 2022.

The total actual borrowing this year is much lower because several states plan to borrow over the next few years. Except for the states of Brandenburg, Hesse, Rhineland-Palatinate, and Saxony-Anhalt, which have not submitted borrowing reports, the actual borrowing of the remaining 12 states so far is only about 40 billion euros. Many states plan to allocate a large portion of this year's borrowing to spending in the following year, with Bavaria alone at 10.7 billion euros. The state of Saxony plans to borrow a total of 6 billion euros until 2022. However, most states have also planned additional borrowing in 2021 with a total value of up to 17 billion euros.

Foreign debt: $6.69 trillion

Norway boasts the second-highest per capita GDP in Europe (only behind Luxembourg) and the sixth-highest per capita GDP (PPP) globally. Presently, Norway is ranked as the second-richest nation globally in terms of currency value, with the largest per capita capital reserves of any country. However, foreign debt also surged in 2021 to $7.11 trillion USD. The per capita debt is the second-highest globally at approximately $1,319,360 USD.

The economy of Norway is a model of a mixed economy, a prosperous welfare capitalist state, and a social democratic country with a blend of a free-market economy and significant state ownership in crucial economic sectors. Public healthcare in Norway is entirely free. The state revenue from natural resources significantly contributes, with a substantial portion coming from the oil and gas industry. Norway has an unemployment rate of around 4.8%, with 68% of the population aged 15-74 employed. Additionally, 9.5% of the population aged 18-66 receives disability benefits, and 30% of the workforce is government-employed, the highest among OECD countries. Labor productivity, as well as average hourly wages in Norway, rank among the highest globally.

The Netherlands is a country located in Northwestern Europe. About 6500 km2 of the Netherlands is reclaimed land, a result of meticulous water management dating back to the Middle Ages. Along the coastline, land is reclaimed by sea dikes, while inland, some lakes and swamps are drained. All these reclaimed lands are often surrounded by dikes. The English name of the Netherlands means 'low-lying land.' Indeed, this country is low-lying and flat. If the Netherlands loses the protection of dunes and dikes, the most densely populated areas, places that are no more than 1m above sea level (half the Netherlands' area), would be submerged, and ¼ of the total area of this country would even be below sea level.

Currently, The Netherlands has the 16th largest economy globally. Between 1998 and 2000, the economy grew on average by 4%, well above the European average. Growth slowed significantly from 2001-05 due to global downturn. However, in 2006, it rebounded by 2.9%. The growth reached 4.2% in the third quarter of 2007. Inflation is at 1.3% and could drop to 1.5% in 2008. According to Statistics Netherlands, unemployment is currently 4.0% of the total workforce. According to Eurostat standards, the unemployment rate in the Netherlands is only 2.9%, the lowest rate among EU countries.

Foreign Debt: $4.19 trillion

The latest statistics from the Ministry of Finance of Japan reveal that the country's national debt has reached a new record high. Specifically, by the end of June 2022, the total outstanding national debt of the central government exceeded 1,255 trillion yen (over 9,421 billion USD), the highest ever. Thus, with a population as of July 1 of about 124.84 million people, Japan's per capita national debt is 10.05 million yen (over 75,000 USD) per person.

The total national debt (including government bonds, financial bonds, and borrowings) increased by 13,885.7 billion yen compared to the end of March 2022 (the end of fiscal year 2021). During this period, the outstanding amount of financial bonds increased by 24,299.9 billion yen to 110,498.8 billion yen, while the outstanding amount of government bonds decreased by 7,075.9 billion yen to 984,335.3 billion yen. The main reason for the continued increase in Japan's national debt is the country's significant spending on COVID-19 prevention, coupled with the growing social welfare costs due to an aging population.

Regardless of how you look at it, Japan's debt is remarkably high. According to the Bank of Japan (BoJ), at the end of 2019, Japan's debt was at 1,328 trillion yen, equivalent to about 12,200 billion USD, just over half the total debt of the United States in absolute terms. However, when compared to the scale of Japan's economy, this is the world's largest debt, equivalent to about 240% of the Gross Domestic Product (GDP) of the country.

Foreign Debt: $4.68 trillion

With a population of only about 350,000 people, the icy island nation Iceland, also known as the Ice Island, was heavily affected by the 2008 financial crisis. The crisis hit the icy island in October 2008, causing severe economic consequences: the currency collapsed, inflation soared, and the economy contracted by 10%, leading to thousands losing their jobs. At that time, Iceland's government had to seek an International Monetary Fund (IMF) bailout to help the struggling economy recover.

Before the 2007 financial crisis, the public debt ratio of Iceland was modest at 27% of GDP. However, after 8 years, the country still grapples with the aftermath of the banking system collapse. Ireland completed its financial bailout program 2 years ago, but the country is still dealing with a massive public debt. Despite the high debt levels, Ireland is seen as moving in the right direction as it successfully recapitalized many debts in the banking system.

However, just 3 years after that horrific moment, Iceland is recovering at a faster pace than any other European economy. Recently, the Organization for Economic Cooperation and Development (OECD) even forecasted that Iceland's economy in 2013 would outperform the entire eurozone.

9. Luxembourg

Luxembourg is a small country located in Western Europe, bordered by France, Germany, and Belgium. The full name of this nation is the Grand Duchy of Luxembourg with a constitutional monarchy. Luxembourg has an area of 2,586 square kilometers and a population of less than 500,000 people, mainly following the Catholic faith. Luxembourg boasts the highest per capita Gross Domestic Product (GDP) in Europe and globally, reaching 110,573 USD per person, 54.5 times higher than Vietnam's GDP per capita. The industrial and financial sectors are considered the pillars of the economy. Additionally, the country has low unemployment and inflation rates, favorable tax policies, and a quality of life ranked among the highest in the world. The national language is Luxembourgish, with administrative languages being French and German. English is also widely used.

Luxembourg is a small yet economically open country, closely tied to EU interests. In recent years, Luxembourg has consistently been one of the fastest-growing nations in the EU, with a per capita GDP income exceeding 100,000 USD in 2012, ranking at the top globally. Luxembourg excels in areas such as banking, information technology, and telecommunications. It serves as a crucial hub for businesses from Asia and the Americas in the e-commerce sector.

Foreign debt: $3.96 trillion

10. Spain

At the beginning of 2010, the public debt-to-GDP ratio of Spain was even lower than that of the UK, France, and Germany. Nevertheless, commentators pointed out that Spain's economic recovery was fragile due to rapidly increasing public debt, making local banks struggle to secure large bailout packages. The future growth prospects were predicted to be bleak, leading the central government to restrict local government spending and control their revenue sources.

Spain operates on a system where responsibilities between local and central governments are shared since 1975. Consequently, when most of the spending responsibilities fall on local regions, it becomes challenging for the central government to gain support for substantial budget cuts from already resistant local governments.

On April 17th, Spain announced that short-term borrowing costs nearly doubled compared to a month ago. If borrowing costs continue to rise, Spain may default on its debt—a predicament that previously forced Ireland, Portugal, and Greece to seek EU bailouts. However, Spain is not Greece, so the consequences would be more severe. The default of the fourth-largest eurozone economy would undermine confidence in the currency.

Foreign debt: $2.66 trillion

11. Italy

The financial woes of Italy are worsening. The yield on Italy's 10-year government bonds, which reached 3% when President Sergio Mattarella temporarily halted the 5 Star Movement and The League's efforts to form a government, is likely to rise even higher, posing the risk of pushing Italy and the eurozone into an uncontrollable crisis.

Italy is not just a country with many problems; it is also large in scale. Italy's troubled banking sector is the third-largest in Europe, after France and Germany. The Italian government's public debt is currently at 2.5 trillion EUR, equivalent to 2.95 trillion USD. Italy's public debt is thus equivalent to the combined public debt of France and Germany, surpassing the total debt of Spain, Portugal, Greece, and Ireland—four countries that had to be bailed out. A financial crisis in Italy would quickly break down the defensive barriers that European officials once built. Among the Eurozone countries, Italy currently has the second-highest debt-to-GDP ratio.

The Italian economy continues to struggle since the financial crisis due to overwhelming debt. With a GDP scale ten times that of Greece, Italy is raising concerns about the future of the euro and the European financial system. The debt crisis is also the focal point of political instability in Italy, as successive governments have been unable to resolve this issue.

Foreign debt: $2.74 trillion

In 1993, Canada faced a budget deficit of up to 30 billion USD. About 36% of the government's budget revenue was used to pay off debt. Finance Minister Paul Martin successfully reduced the massive budget deficit, leading Canada into 12 consecutive surplus years. Paul Martin implemented spending cuts. The weak Canadian dollar and the boom in the U.S. economy helped the country achieve budget balance.

In the 1998 budget, the Canadian government estimated that reducing the budget deficit by 55% was due to economic growth and 35% was due to spending cuts. Don Drummond, in charge of the budget under Martin, said that the U.S. and Europe would not be able to easily reduce budget deficits due to the current economic difficulties compared to the 1990s. In 2008, Canada was not immune to the global economic crisis, but its recovery rate was faster than other countries. Although Canada's budget deficit is currently at its highest level in history, the International Monetary Fund (IMF) still believes that this North American country is the only G7 country - the group of the world's seven largest developed economies - to have a budget surplus in 2015. More importantly, Canada did not suffer from the mortgage credit crisis or subprime credit crisis.

Foreign debt: $2.41 trillion

According to the latest report from the global McKinsey Global Institute (MGI), the total external debt of China has increased rapidly since the global financial crisis, stemming from the implementation of stimulus packages and policies to support economic development after the crisis by the Chinese government. Accordingly, the total debt has increased fourfold, from $7 trillion in 2007 to over $28 trillion at the end of 2014, nearly three times China's GDP. If this upward trend continues, it is forecasted that by 2018, China's total external debt will reach 400% of GDP, equivalent to countries facing debt crises in Europe such as Spain.

The instability lies not only in the rapid increase in total debt over time but also in the debt structure, with half of the loans directly or indirectly related to China's real estate market. Uncontrolled bank accounts account for nearly half of new loans, and most of the debts of local governments are unsustainable. MGI's research also reveals that in China's total external debt, the proportion of borrowing by the corporate and organizational sector is quite large, especially in the non-financial corporate sector, including real estate development companies.

Foreign debt: $2.52 trillion

The economy of Hong Kong is a highly developed free-market capitalist economy, considered one of the freest economies in the world. Economists like Milton Friedman and the Cato Institute often cite it as a prime example of the benefits of free-market capitalism. Hong Kong is one of the four Asian Tigers, alongside South Korea, Singapore, and Taiwan.

The current GDP of the Hong Kong economy is estimated at $373 billion, ranking among the top 30 in the world. The per capita income is approximately $48,517, placing it in the top 20 globally. While both the British and the People's Republic of China governments have at times intervened in Hong Kong's economy, the policy of non-intervention advocated and implemented by former British finance minister John James Cowperthwaite remains the main driving force behind the territory's free-market economic policies. Hong Kong has ranked first in the world for economic freedom for 14 consecutive years since the inception of the index in 1995.

External Debt: $1.77 trillion

In the next 2-3 years, Switzerland may begin repaying a debt of tens of billions of USD incurred due to economic support policies during the pandemic. Swiss Finance Minister Ueli Maurer stated on a recent radio program that if everything progresses 'extremely well,' the debt arising from the government's reduction of working hours and support for businesses affected by Covid-19 would be around 20 billion Swiss francs (21.15 billion USD).

However, if not, this figure could rise to 35 billion francs. Although this amount is still less than the Swiss government's initial estimate of 40 billion francs, Maurer cautioned that many factors remain uncertain. He mentioned that Switzerland could start reducing the incurred debt in the next 2-3 years and complete the repayment within 15 years. Last week, the Swiss government announced that it would decide how to repay the debt by the end of the year. Maurer emphasized that they would not raise taxes to accomplish this. He suggested a feasible option would be to allocate the annual government profit from the Swiss National Bank, dismissing calls for the institution to make a one-time special payment. Maurer stated that the central bank needs to remain independent, and politicians should not interfere with the assets that the institution might need to intervene in the currency market to curb the appreciation of the Swiss franc. He explained that this contribution is essential for a country heavily dependent on exports.

External Debt: $2.22 trillion