Can a country refuse to pay its debt?
Any country can default on its debt either because it can't pay (e.g. Argentina every few years) or because it decides not to pay (e.g. revolutionary China).
Key Takeaways. Sovereign defaults happen when a nation can't pay its bills or repay its debt obligations, which technically makes it bankrupt. The prospect of sovereign default is scary for investors, but many countries have never defaulted on their debts.
It has serious economic consequences for the nation, making it expensive or impossible for it to borrow money in the future. It also causes domestic turmoil. Many banks, pension funds, and individual investors keep some of their assets in sovereign bonds. The nation's financial failure ripples through its economy.
One of the main culprits is consistently overspending. When the federal government spends more than its budget, it creates a deficit. In the fiscal year of 2023, it spent about $381 billion more than it collected in revenues.
If a country's debt crisis is severe enough, it could result in a sharp economic slowdown at home that impedes economic growth elsewhere in the world. Rising costs of food and other goods and services due to inflation as a government prints money to support its expenditures.
Jordan is one of the few countries around the world that still allow imprisoning people for debt. As of April 1, at least 148,000 people were wanted to serve prison terms for unpaid debts, according to the Justice Ministry.
| Characteristic | National debt in relation to GDP |
|---|---|
| Macao SAR | 0% |
| Brunei Darussalam | 2.06% |
| Kuwait | 3.08% |
| Hong Kong SAR | 4.27% |
The public includes foreign investors and foreign governments. These two groups account for 30 percent of the debt. Individual investors and banks represent 15 percent of the debt. The Federal Reserve is holding 12 percent of the treasuries issued.
- Japan. Japan has the highest percentage of national debt in the world at 259.43% of its annual GDP. ...
- United States. ...
- China. ...
- Russia.
China's debt-to-GDP ratio climbs to record 287.8% in 2023 - Nikkei Asia.
Who owes the US money?
| Country/territory | US foreign-owned debt (January 2023) |
|---|---|
| United Kingdom | $668,300,000,000 |
| Belgium | $331,100,000,000 |
| Luxembourg | $318,200,000,000 |
| Switzerland | $290,500,000,000 |
Interest Rates
Maintaining interest rates at low levels can help stimulate the economy, generate tax revenue, and, ultimately, reduce the national debt. Lower interest rates make it easier for individuals and businesses to borrow money for goods and services, which creates jobs and increases tax revenues.
China is one of the United States's largest creditors, owning about $859.4 billion in U.S. debt. 1 However, it does not own the most U.S. debt of any foreign country.
Businesses will close resulting in increased unemployment. If people are unemployed and their savings are almost worthless, they will not be able to afford even the necessities of life.
An Explainer. Just about every country has debt: governments take loans to pay for new roads and hospitals, to keep economies ticking over when recessions hit or tax revenues fall. Sometimes they borrow from countries, other times banks, or maybe asset managers—companies like those investing your pension dollars.
Low Interest Rates: Japan has maintained a low interest rate environment for an extended period, partly due to the Bank of Japan's monetary policies. This means that the cost of servicing the debt is re.
China owes the United States $1.3 trillion, which is the most debt out of all the countries that are its debtors. Japan was the primary debt holder until 2008, but now comes in second place, with $1.2 trillion. Other countries with outstanding U.S. debt include Russia, India and South Korea.
Why History Shows the United States Will Not Grow Out of Its Debt. The United States is approaching record levels of debt. Debt held by the public totaled 97 percent of gross domestic product (GDP) at the end of 2022 and is on track to exceed its previous all-time high, which occurred just after World II, by 2029.
- Japan.
- China.
- The United Kingdom.
- Luxembourg.
- Canada.
Tax cuts, stimulus programs, increased government spending, and decreased tax revenue caused by widespread unemployment generally account for sharp rises in the national debt. Comparing a country's debt to its gross domestic product (GDP) reveals the country's ability to pay down its debt.
Who does China owe debt to?
[2] A report by the credit rating agency S&P Global in 2022 estimated that 79 per cent of corporate debt in China was owed by SOEs (the IMF does not break down the proportion of debt owed by SOEs).
India takes the top spot. Its $39.7bn debt towards the WB recorded at the end of 2021 is double that of the next biggest debtor, Indonesia, with $19.6bn.
The financial position of the United States includes assets of at least $269 trillion (1576% of GDP) and debts of $145.8 trillion (852% of GDP) to produce a net worth of at least $123.8 trillion (723% of GDP).
Top 10 territories that own the most U.S. debt
In total, other territories hold about $7.4 trillion in U.S. debt. Japan owns the most at $1.1 trillion, followed by China, with $859 billion, and the United Kingdom at $668 billion.
At this time only four countries, discussed below, owe the U.S. government debts of any size arising from World War II programs to aid our allies. Other countries have paid their debts in full.
