With global debt levels at all-time highs, many countries around the world are facing mounting fiscal pressures. But which countries owe the most money? Using data from the IMF, World Bank, and other sources, this article will examine the countries with the highest public and private debt levels.
Countries with the Highest Public Debt Levels
Public debt refers to debt owed by governments through issuing bonds and securities. According to the IMF, here are the top 5 countries with the highest public debt levels as a percentage of GDP:
| Country | Public Debt (% of GDP) |
|---|---|
| Japan | 237% |
| Greece | 181% |
| Italy | 148% |
| Portugal | 127% |
| Singapore | 126% |
As shown, Japan far outpaces any other country with public debt reaching 237% of GDP. For context, Greece’s public debt woes were a major factor in the Eurozone debt crisis. However, Japan has managed to sustain extremely high debt levels due to strong domestic savings and low borrowing costs. Other countries with high public debt face greater fiscal and economic risks.
Debt Dynamics in Japan
Despite having the highest public debt levels globally, Japan has avoided a debt crisis for several reasons:
- High domestic savings rate – Japanese households save 15% of disposable income, which provides a stable source of demand for government bonds
- Bond holdings domestically – Over 90% of Japanese debt is held internally by households, pension funds, and local banks
- Low interest rates – Accommodative monetary policy has kept rates low, reducing debt servicing costs
- Own currency – Japan has autonomy over monetary policy since JPY is a free-floating sovereign currency
However, Japan’s debt still remains a long-term vulnerability. Rising social security costs due to an aging population are projected to put more pressure on debt levels in the coming decades.
Greece’s Contentious Debt Burden
Greece has the second highest public debt as a share of economic output. Unlike Japan, Greece does not have the same advantages of high domestic savings or an independent monetary policy. When the Global Financial Crisis hit in 2008-2009, it exposed the vulnerabilities of Greece’s debt-fueled economy. This kicked off the European Debt Crisis:
- Global recession caused Greek GDP to plunge while debt levels remained high, worsening debt ratios
- Financial markets lost confidence in Greek bonds, leading borrowing costs to spike
- Greece was unable to rollover existing debt or finance new deficits, forcing it to seek bailouts
- Three bailout packages totaling over €300 billion were provided by the Troika (EU, ECB, IMF)
- Bailout conditions imposed strict austerity, deepening Greece’s recession
While Greece has emerged from bailout programs, debt sustainability remains a challenge. However, further debt relief has proven politically contentious in the EU.
Countries with the Highest Private Debt Levels
In addition to public debt, some countries have high levels of private sector debt that can pose financial stability risks. According to the IMF and OECD, here are the countries with the largest private debt as a percentage of GDP:
| Country | Private Debt (% of GDP) |
|---|---|
| China | 211% |
| South Korea | 185% |
| Thailand | 159% |
| Hong Kong | 153% |
| Singapore | 126% |
China tops the list with private debt exceeding 200% of GDP driven by the accumulation of corporate debt. Across emerging Asian economies, high investment rates have contributed to increasing private leverage over the past decade.
China’s Credit Boom
China’s growth model has relied heavily on credit expansion and investment. However, this has resulted in soaring corporate debt:
- State-owned firms borrowed substantially during China’s stimulus program after the Global Financial Crisis
- More recently, private companies have increased leverage especially in the property development sector
- Weaker productivity growth has meant more credit is needed to generate growth
- Hidden debt through opaque shadow banking products grew rapidly
Concerns remain over underlying risks from high corporate debt despite Chinese government efforts to deleverage the economy and reform state-owned enterprises.
Debt Outlook Going Forward
While debt levels are highest among advanced economies like Japan and periphery Eurozone countries, emerging markets have also seen debt burdens rise rapidly since the Global Financial Crisis:
- Low interest rates encouraged increased borrowing, especially dollar-denominated debt
- Commodity exporters saw debt grow due to recession and infrastructure spending
- External vulnerabilities increased with higher foreign-currency debt
However, debt dynamics can change quickly as seen during the pandemic crisis:
- Borrowing costs declined due to monetary stimulus
- Fiscal deficits widened to support economies through lockdowns
- Debt sustainability improved in some advanced economies like the US
- Defaults rose in struggling emerging markets
Going forward, rising interest rates may put greater focus on high debt burdens globally. But across advanced economies, central banks appear poised to maintain more accommodative policies relative to past tightening cycles, suggesting government borrowing costs may remain contained. Nevertheless, emerging markets with high foreign-currency debt remain vulnerable to financial volatility. Therefore, the risks around debt sustainability will likely vary between advanced versus developing economies.
Conclusion
In summary, Japan maintains the highest public debt levels globally though domestic dynamics have provided stability thus far. Among Eurozone countries, Greece faces ongoing debt pressures. For private debt, China and other East Asian economies have seen corporate leverage swell in recent years. While developed markets appear to have more room to sustain high debt, financial risks remain in emerging markets. Therefore, even as global debt has risen substantially since the financial crisis, not all countries face the same challenges due to their differing economic situations.