Debt is a common function of all working economies. Public debt, also known as national debt or government debt, is the debt owed by a nation’s central government. It includes money owed by the government to creditors within the country (domestic, or internal debt) as well as to international creditors (foreign, or external debt). However, as a government draws in much of its income from its population, government debt is an indirect debt on taxpayers.
While the size of the debt matters, the ability to make the payments is even more important. Who is owed money is also crucial. Internal debt, when the country’s debt is held by its own citizens, helps diminish greatly the risk of defaulting. Many other countries owe mostly to foreign creditors and these foreign creditors can be either trusted allies or rivals using loans as leverage to extend their strategic or military reach, a situation aptly called “debt trap”.
Debt is a double-edged sword. It is often used to generate future growth, but fiscal discipline is crucial: persistently running deficits means sooner or later the default point will be reached-not considering that even when default is avoided, the snowballing cost of financing debt becomes an unaffordable burden over the shoulders of future generations. Borrowing to finance public spending requires a careful balancing act. Doing so can either promote growth or lead to fiscal imbalances that stifle it.
Here are the top 20 countries with the most debt in the world.