A frequently asked question is – Who does the Government Borrow from?
Firstly, it is important to stress this government borrowing is different from external debt of a country (total owed by private and government sector) and the balance of trade (imports and exports)
The government needs to borrow because it spends more than it receives in tax revenue. To finance this shortfall the government (often through an intermediary such as the Debt Management Office in the UK) sell bonds, gilts and treasury bills.
These are bought by private sector institutions such as pension funds, investment trusts and banks.
The majority of these private sector buyers are domestic financial institutions. I.e. most UK debt is owned by the UK private sector.
About 30% of UK national debt is held by oversees investors.
Graph Showing UK Debt Held By Overseas Investors
Source: UK DMO
Who Owns US National Debt?
As of March 4, 2009, the total U.S. federal debt was $10,942,165,294,650.89 (just under $11 trillion) You can find latest figure here at US Treasury Direct
The biggest foreign holders of US debt are:
- China – $727 bn
- Japan – $629 bn
- UK – $157 bn
- Brazil – $129bn
- Russia – $116bn
Total foreign debt holdings = $3,000bn or about 28% of total national debt.
Note: in 2001, foreign debt holdings were $1,051 bn or 17% of total holding
Source: debt statistics at US treasury
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