Countries with High Debt-to-GDP Ratios: The Top Five
The debt-to-GDP ratio, also known as the government debt ratio, is the amount of a country’s national debt in relation to its gross domestic product (GDP). A high debt-to-GDP ratio can indicate a burden on the government to repay its debts, potentially leading to economic instability. Here are the top five countries with the highest debt-to-GDP ratios in the world:
As of 2021, Japan has a debt-to-GDP ratio of 266.2%, the highest in the world. Japan’s debt has been on the rise for decades due to a combination of factors such as economic factors including deflation, aging population, and over-reliance on exports. Japan’s Ministry of Finance is actively working towards reducing its debt but given the lackluster economic environment, it is challenging for Japan to make significant progress in that direction.
Greece has a debt-to-GDP ratio of 205.6% the second-highest in the world. The country’s rising debt is a result of the 2008 financial crisis, where high levels of public debt, combined with a faltering economy and low tax revenues, forced Greece into a deep recession. Since then, the country has had to take various measures to strengthen its financial position, including bailout packages from the European Union.
Sudan has a debt-to-GDP ratio of 194.6%. The country has experienced economic challenges such as inflation and political instability, which has led to a further accumulation of debt. In addition, the country faces trade-related issues, coupled with weak economic policies, which have negatively impacted its financial position.
Venezuela has a debt-to-GDP ratio of 165.2%. The country has seen extreme political instability and economic challenges, pushing its economy into constant turmoil. The devaluation of the Venezuela bolivar and hyperinflation have caused significant financial distress leading to more government borrowing to keep the economy afloat.
Lebanon has a debt-to-GDP ratio of 158.9%. The country has long operated on a system of patronage and political corruption, which has limited its ability to carry out necessary economic and financial reforms. The country’s rapid accumulation of debt is due to its reliance on foreign aid, which has ballooned its fiscal deficit.
What is the debt-to-GDP ratio?
The debt-to-GDP ratio is the amount of a country’s national debt in relation to its gross domestic product (GDP). It is calculated by dividing national debt by GDP.
Why is a high debt-to-GDP ratio concerning?
A high debt-to-GDP ratio can indicate a burden on the government to repay its debts, which could lead to economic instability and negatively impact the country’s future economic growth prospects. Additionally, high debt levels typically incur interest payments, creating further financial pressure for the country.
What measures can a country take to reduce its debt-to-GDP ratio?
Countries can take several measures, including cutting government spending, increasing revenues, and implementing financial reforms. Governments can also consider the sale of state-owned assets, privatization, and the issuance of government bonds to finance economic growth.
Can a country default on its debt?
Yes, a country can default on its debt, meaning it cannot make payments to its creditors. This can have long-term negative effects on the country’s economy, making it difficult and costly for the country to borrow money in the future.