In this article, we will be taking a look at the 30 countries with the most debt in the world. To skip our detailed analysis, you can go directly to see the 5 countries with the most debt in the world.
Debt is often misconstrued to refer to something extremely negative, a thought process which has continued for thousands of years. While debts have to be managed of course, having a healthy amount of debt allows for investments which can result in greater return that the cost of debt. However, at the same time, debt needs to be managed to ensure that it doesn't spiral out of control otherwise, as even the interest payments can be enough to sink a country or people. This is why you'll often note people who've paid more than their total borrowings amount on student loans, and yet, the principal amount doesn't even decrease as the payments made only satisfy the interest component of the total debt.
Unlike people, most countries have extensive systems and highly qualified people in place to manage their external debts, including some of the countries with the most debt in the world. Most governments use public debt to finance infrastructure projects and invest in the country's future and for its people, and countries have added a lot of debt in recent years because of low interest rates. On the other hand, developing countries have seen their debt rise significantly, driven by various crises including Covid-19, the cost-of-living crisis which might have abated somewhat in developed countries but is continuing to wreak havoc in developing countries, and climate change, which has had a disproportional impact on developing countries because of their geography.
30 Countries with the Most Debt in the World
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Having this much debt can be destabilizing for many developing countries, especially in today's economy, and while not equally, is still impacting some of the countries with the highest debt levels. Interest rates have been hiked significantly across the world in the last almost two years in a bid to combat record inflation. The U.S. dollar also continued to appreciate against most currencies, especially against the currencies of developing countries, which put more pressure on their borrowings and has impacted their ability to fight against emergencies. All of this means that while there are many fast growing countries among the nations with the highest debt in the world, there is also a much greater risk of investment, as seen in the Sri Lankan economic crisis, which resulted in the country defaulting on its sovereign debt in 2022. Of course, developing countries are always at a greater risk of default because of a lack of stability, as even though the U.S. is the country with the highest external debt in the world, it is generally not at risk of defaulting on its debt apart from internal political issues which led to a debt impasse earlier this year, and was eventually resolved.
Similar to the issues being faced by the countries with the highest debt in the world, highly leveraged companies are being impacted by higher interest rates too, as high interest payments dampen profits and earnings, which in turn impacts growth and investor opinions. Generally, industries which require heavy capital investment tend to be more leveraged because greater borrowings are required to have the funds needed to get off the ground. The airline industry is one such industry, which has already been struggling in the last few years as a result of the impact of Covid-19 on the tourism industry, and even the most profitable airlines in the world have struggled to make a profit. This was the worst possible time for the industry to be hit with higher interest rates, which has also led to many major airlines decreasing their debt levels. Delta Air Lines, Inc. (NASDAQ:DAL), one of the biggest airlines in the world, recently spoke about restructuring debt in its Q2 2023 earnings call, where it stated "During the first half of 2023, we repaid $3 billion of debt, including $1.4 billion of early repayments, with a focus on our high-cost debt. For the year, we expect to repay over $4 billion of gross debt, resulting in interest costs over $100 million lower than our initial expectations. Our leverage ratio improved to 3.2 times on a trailing 12-month basis, and this is down from five times at the end of the year." This move, combined with significant improvements in air travel especially domestically, resulted in better than expected Q2 2023 financial results, and Delta Air Lines, Inc. (NASDAQ:DAL) has seen its share price climb by over 20% YTD.
Similarly, Ryanair Holdings plc (NASDAQ:RYAAY), an ultra-low budget airline headquartered in Europe, has also considered interest rate impact on its operations and how the reduction of debt can help. The advantage that Ryanair Holdings plc (NASDAQ:RYAAY) has with respect to interest rates is the fact that it owns all its 737 aircraft, and hence, doesn't have to pay higher interest on lease like other airlines do. In its Q2 2023 earnings call, Ryanair Holdings plc (NASDAQ:RYAAY) stated "I want -- just to point out, of that €4.6 billion, €1.6 billion of that is for debt repayment next year and then we're in peak CapEx. So we're spending about €2 billion a year. Like it's -- we don't have €4.6 billion spare lying around. We have uses for that. But the opportunity that we're paying -- we will pay down bonds next year that are funded at 1.2%, 1.5%. If we were to refinance at the moment -- even for us, we're looking at 5%, 6%. So I think, it's in our interest as an airline to pay down debt, while our competitors will either be looking at additional equity raises or refinancing bonds and debt markets that have moved materially adverse. So it's more sensible for us to use the cash and pay down debt." Ryanair Holdings plc (NASDAQ:RYAAY) has had an exceptional year so far which resulted in its share price increasing by nearly 35% YTD.
Methodology
To determine the countries with the most debt in the world, we headed over to the International Monetary Fund, which also provides loans and help to countries facing an economic crisis. We have ranked each country based on its total debt as a percentage of GDP in 2022.
30. Germany
Debt as a percentage of GDP in 2022: 66.5%
The Covid-19 pandemic and the energy crisis has resulted in the country's debt spiraling and reached a record high of over 2.3 trillion euros in 2023.
29. Croatia
Debt as a percentage of GDP in 2022: 67.5%
Croatia has continued to reduce its debt levels and strong economic performance post-Covid has strengthened its debt to GDP ratio. If it continues in this manner, Croatia will likely drop off our list in the coming years.
28. Albania
Debt as a percentage of GDP in 2022: 67.6%
Albania has been hit by various crises including the pandemic, earthquake, and natural disasters, all of which added more than 2 billion euros to the total debt in just 2 years. Debt growth rate has exceeded economic growth rate in recent years and a public debt crisis is looking like a major possibility.
27. Iceland
Debt as a percentage of GDP in 2022: 68.7%
Iceland was one of the most impacted countries from the 2008 financial recession, and at one point, the debt to GDP ratio was close to 100%.
26. Slovenia
Debt as a percentage of GDP in 2022: 69.9%
While Slovenia's economy has posted a strong recovery post-pandemic, its debt to GDP ratio still makes it one of the most indebted countries in the world. According to the IMF, a tighter fiscal policy is needed to reduce the country's debt burden.
25. Montenegro
Debt as a percentage of GDP in 2022: 71.2%
China has given out a lot of debt to developing countries including Montenegro and a Chinese built highway saw just the first section of the highway being so expensive, that the Montenegro government stated in 2021 that it couldn't afford to build the remainder of the highway.
24. Yemen
Debt as a percentage of GDP in 2022: 73.5%
Yemen's debt is incredibly high as a lack of fiscal reform for decades has hampered its ability to prosper, even before the decade long ongoing crisis which has resulted in one of the worst humanitarian crises in history.
23. Finland
Debt as a percentage of GDP in 2022: 74.8%
Finland's borrowings are mainly to finance investments in public benefit projects such as infrastructure, and in 2023, Finland is expected to obtain an additional 10 billion euros of debt to cover its budget, while its interest expense is expected to be 2.3 billion euros.
22. Hungary
Debt as a percentage of GDP in 2022: 75.9%
Hungary had one of the highest inflation rates in Europe, which has had a detrimental impact on its debt too.
21. China
Debt as a percentage of GDP in 2022: 77.1%
While China has lent trillions of dollars mainly to developing economies, gaining huge influence in turn, it also has really high debt levels and according to Nikkei Asia, off-the-book debts of local Chinese governments has exceeded $8 trillion.
20. El Salvador
Debt as a percentage of GDP in 2022: 77.2%
One of the countries with the highest debt levels in South America, El Salvador bonds have seen their value increase by more than 60% YTD 2023.
19. Austria
Debt as a percentage of GDP in 2022: 77.8%
While most eurozone nations are seeing inflation rates continue to fall, Austria has not seen a similar downward trend.
18. Ukraine
Debt as a percentage of GDP in 2022: 81.7 %
Ukraine has been mired in a devastating war with Russia for more than a year and a half now, though recently Morgan Stanley earned a 47% return on Ukrainian debt warrants.
17. Mongolia
Debt as a percentage of GDP in 2022: 82.4%
Mongolia is currently facing a challenge of maintaining its economic momentum amid internal and external headwinds, to maintain control over its debt to GDP ratio.
16. India
Debt as a percentage of GDP in 2022: 83.1%
India is continuing to grow in stature in the global economy, but at the expense of high levels of debt, and the vast majority of its debts are internal, though Moody's recently did comment that India's debt burden is high and weak debt affordability, something refuted by Indian government officials.
15. Brazil
Debt as a percentage of GDP in 2022: 85.3%
Brazil is one of the countries with the most debt and is in the midst of a looming debt crisis with the economy comparatively slowing down, and its Central Bank chief has said that higher interest rates have led to increased debt levels.
14. Cyprus
Debt as a percentage of GDP in 2022: 86.5%
Cyprus faced a banking crisis from 2012 to 2013, and repercussions are still being faced in the country ever since. The country received 1 billion euros from the IMF mainly to stabilize the banking sector and to undergo strong fiscal adjustment.
13. Mauritius
Debt as a percentage of GDP in 2022: 87.0%
The pandemic has been one of the major reasons behind Mauritius being among the countries with the highest global debt levels, as revenue losses have exacerbated the country's debt issue.
12. Egypt
Debt as a percentage of GDP in 2022: 88.5%
In the last eight years, external borrowing quadrupled in an effort by the government to invest in new infrastructure and buy more weapons, but now Egypt is struggling to obtain cash for repayment of foreign debt.
11. United Kingdom
Debt as a percentage of GDP in 2022: 101.4%
The United Kingdom recently announced a delay in its ban on petrol and diesel car sales, from 2030 to 2035, as the spend required to make this a reality would increase already high debt.
10. Belgium
Debt as a percentage of GDP in 2022: 105.3%
The energy crisis resulted in Belgium's debt to GDP ratio increasing more than expected because of additional spending, as its indexation of pension, social benefit and wage indexation has resulted in positives of inflation being more than offset.
9. Canada
Debt as a percentage of GDP in 2022: 106.6%
Household debt is one of the reasons why Canada's debt crisis is continuing to increase and has the highest household debt in G7.
8. France
Debt as a percentage of GDP in 2022: 111.7%
While the European Union's target of debt to GDP ratio is 60%, France is well in excess of this requirement, and public debt has been approaching 3 million euros.
7. Spain
Debt as a percentage of GDP in 2022: 112.0%
Spain has been among the nations with the most debt in the world for many years, and increased government spending while the economy was impacted by Covid-19 has seen debt levels continue to rise significantly.
6. Portugal
Debt as a percentage of GDP in 2022: 116.0%
Portugal's high debt levels even in 2023 are a result of government actions taken during the 2008 recession and in May 2022, Portugal pledged to reduce debt amid higher interest rate payments.
