List of Gross External Debt by Country

• External debt refers to the total amount of money borrowed by a country from foreign lenders. This includes government debt, private sector debt, and debt owed by banks and corporations to overseas creditors. It must be repaid in foreign currency, which creates additional risks beyond normal domestic debt.
• External debt is different to measures of public (government) debt. See: List of national debt by country.
• Some countries with high levels of external debt, also have high levels of external credit. For example, Malta, Cyprus, and Ireland have attracted capital flows to take advantage of favourable tax regimes. Therefore, they have both assets and liabilities.
• In fact, they could be net international creditors because there assets are greater than their debt levels.
• Countries with large banking systems tend to have higher levels of external debt because they correspondingly hold more international assets. The problem comes when the assets they hold fall in value, e.g. Hong Kong, UK and Singapore.
• However, some countries can have high external debt because of past borrowing requirements and high levels of government debt. For example, Greece has one of the highest levels of external debt 233% of GDP.  (This was because of the Greek crisis) During the debt crisis of 2010 onwards Greek debt became overwhelming and they required foreign borrowing. Another country with real crisis is Sudan – External debt of 202% of GDP but little assets or credit.
• The US has the highest level of debt in absolute terms with $25 trillion, just slightly smaller than the size of the US economy

Why Countries Borrow Externally

• Finance investment when domestic savings are insufficient.
• Stabilise the currency or rebuild reserves.
• Smooth consumption during temporary shocks (e.g., commodity price collapse).
• Fund government deficits when domestic markets do not want to buy enough government bonds.

External debt can be problematic for developing countries if interest payments on their external debt levels impact on a countries ability to invest and spend on current public services.

Risks of External Debt

1. Currency risk Debt must be repaid in foreign currency. If the domestic currency depreciates, the real value of external debt increases.
2. Default risk Countries may struggle to meet repayments, leading to debt restructuring or IMF intervention.
3. Rollover risk Short-term debt may not be refinanced if investor confidence drops.
4. Sudden stop / capital flight A loss of confidence in the country can trigger rapid withdrawal of foreign capital, causing recession.
5. Interest rates rise Sharp rises in global interest rates (e.g., Fed hikes) push up the cost of refinancing. This was big issue for Third World in 1980s, when global rate rise
6. Balance of payments pressure Large external debt requires persistent current account surpluses to service interest payments.

List of External Debt by Country

External links

• External Debt CIA
• External debt wikipedia

Related

• UK External debt

About The Author

Tejvan Pettinger

Tejvan Pettinger. Author of “Cracking Economics” “What Would Keynes Do?” – studied PPE Oxford University (1995-99) and works as an economics teacher and writer.

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