In this article, we will be taking a look at the 25 countries that have the most debt per capita. To skip our detailed analysis, you can go directly to see the 5 countries that have the most debt per capita.
The U.S. has a problem with its debt, which has exceeded $31 trillion in 2022. This is compared to a GDP of $25.66 trillion, according to the Bureau of Economic Analysis. While it’s still the biggest superpower in the world and in overall terms, is also the wealthiest nation in the world, the country is focusing more on subsidizing wealth of its rich rather than investing in cutting-edge technology and further its dominance in the world. While the U.S. is still the most technologically advanced country in the world, China is quickly catching up investing heavily in its attempt to become the tech center of the world, while the U.S. is busy in lowering taxes for billionaires even though such people have more money than they could spend in a hundred lifetimes. The U.S. military, already easily the most powerful in the world, spent around $800 billion to the Department of Defense in FY 2022, a large expenditure which could be better spent with a higher return elsewhere.
While it’s not immediately evident, having a high level of debt does have a direct and indirect impact on citizens of a country. The higher the borrowings, the greater the interest rates as the government has to raise interest rates in order to make its bonds and treasury bills much more attractive to potential investors. Right now, we are seeing record interest rates in an effort to combat record inflation even as most economists believe that a recession is imminent while some state that we already are in one. When interest rates are higher, while yields will be high, so will the cost of borrowing for individuals, from attempting to finance credit cards to leasing cars to even mortgage, which is often the biggest expense for a homeowner. This results in many being driven out of the home ownership market as mortgage payments on high interest rates are basically impossible for most, and especially in a housing market where prices are already sky high. In 2020, when debt was increasing at a high rate drawing concern from many economists, the interest rates were still incredibly low, which helped mitigate some of the alarm. Now that interest rates are rising to combat inflation, the situation has became a lot more tricky.
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The U.S. debt as a percentage of GDP, after two decades of consistent borrowing, is higher than at any point since World War II and is easily on course to break that record amid projections that the country will go on to borrow $16 trillion more over the next decade. While deficit spending can be beneficial on many occasions, including when deficit spending helped subvert an economic catastrophe through the pandemic, but the risks can outweigh the benefits if deficit spending spirals out of control. It can even help reduce U.S. influence in the world, not just culturally, but in being able to dictate terms according to its wishes because as external debt is owed to foreign powers, they have increased leverage over the U.S. economy.
Instead of spending its money on the younger generation, where returns can be many times greater than the investment, a large portion of the budget in the U.S. is being spent on seniors rather than the younger generation. Eliminating a portion of student debt may be a step in the right direction, allowing the younger generation to decide their future with greater freedom but that does not address the core issue that quality education is out of the reach of many because of the lack of investment in the educational sector.
According to a research paper by the World Bank, governments should implement policies, institutions and mechanisms that allows them to strike a balance between deficit spending and not reaching a level and “and avoiding the risks posed by excessive debt accumulation. For countries with sound fiscal positions and with frameworks that help ensure long-term sustainability, if the cyclical position is appropriate, the balance may tip toward debt-financed spending to boost growth prospects. But for those countries with constrained fiscal positions, alternative policies still exist to expand the fiscal resources available to finance growth-friendly policies.
Countries with a smaller economy also do not have the ability to borrow a lot of money, which is why their total debt and debt per capita is generally much lower than developed economies, which is why few such countries are among the countries with the highest debt per capita. However, they are often in a much worse position despite having a much lower debt per capita because they do not have the reserves or ability to pay off borrowings. This is why, despite the US having a debt per capita more than 20 times higher than Sri Lanka, the former is still the strongest economy in the world while the latter is stuck in a major ongoing economic crisis, defaulting on external debts.
We have determined the countries with the highest debt per capita by first getting data from IMF on expected 2022 total debt by country. Since this was in local currencies, we converted them to USD based on the latest exchange rates. We then obtained population statistics from the World Health Organization and calculated the debt per capita. So let’s take a look at these countries, starting with number 25:
25. Denmark
Total debt per capita: $20,687
Denmark has reduced its debt by 25% as compared to 2021 which now corresponds to just 11% of the country’s GDP.
24. Slovenia
Total debt per capita: $20,764
In September 2022, Slovenia’s debt as a percentage of its GDP is 72.3% while reaching an all-time high of 85% in March 2021.
23. Netherlands
Total debt per capita: $27,613
Netherland’s debt to GDP ratio is at around 50% and is expected to be at similar levels in 2023 and 2024 as well. Recently, in Q3 2022, Netherland’s current account surplus shrunk to to 13.9 billion euros compared to 14.1 billion euros in the preceding year. This has been driven by the goods sector declining versus the previous year, even as the services surplus has increased by 1.5 billion euros.
22. Portugal
Total debt per capita: $28,782
Despite a brief reprieve, Portugal’s debt is still over 100% of GDP but was also made an unlikely economic winner recently by The Economist.
21. Luxembourg
Total debt per capita: $33,043
Since Luxembourg’s population is just over 600,000, even though it is among the richest nations in the world and its debt is not concerning at all, it will always have a high debt per capita. Luxembourg’s debt is only 22% of its GDP.
20. Spain
Total debt per capita: $33,702
While Spain’s government set a target of debt being 115.2% of GDP for 2022, the actual percentage was 116.8%, rising to nearly 1,500 billion euros in June 2022.
19. Finland
Total debt per capita: $34,279
Finland is currently facing a major energy crisis, especially as interest rates rise. This could also result in Finland’s debt to GDP ratio worsening because the energy crisis could slow down its economy.
18. Germany
Total debt per capita: $34,881
Following Russia’s invasion of Ukraine, Germany decided to spend over 100 billion on its defense, which might increase its debt and push it higher among the countries with the most debt per capita.
17. Bahrain
Total debt per capita: $35,433
The IMF lauded Bahrain’s response to the pandemic which allowed economic growth of 2.2% in 2021 while government debt declined slightly as a percentage of GDP from 130% in 2020 to 129% in 2021.
16. Norway
Total debt per capita: $36,101
Norway’s vast sovereign wealth fund means that the country is in a really good position with its financial assets exceeding its total debt.
15. Australia
Total debt per capita: $37,100
China is Australia’s biggest market and accounts for around a third of its total exports and is bigger than its next five markets combined. With China’s indecisiveness regarding Covid-19, from a zero-toleration approach to completely abandoning all restrictions, Australia is facing uncertainty in how 2023 will shape up.
14. Greece
Total debt per capita: $37,508
Greece has been in a debt crisis for a long time now, which started due to heavy government spending while its economic growth slowed down, exacerbating problems.
13. Qatar
Total debt per capita: $37,971
One of two Middle East states among the 25 countries with the highest debt per capita, Qatar recently hosted the FIFA World Cup. While this attempt to improve its reputation may have worked, Qatar has spent billions on the project which will increase the oil rich nation’s debt.
12. Switzerland
Total debt per capita: $38,292
Switzerland is renowned for its strong revenue performance and fiscal policy making which is why its total debt is much lower than its GDP, and why it is easily among the richest countries in the world.
11. United Kingdom
Total debt per capita: $40,112
The UK has been home to some severe political turbulence in 2022, seeing three Prime Ministers in just one year, with government policies varying widely with each Prime Minister as well. UK’s debt is increasing due to payments on inflation-linked bonds which energy prices have increased significantly following Russia’s invasion of Ukraine. Rishi Sunak, the current Prime Minister, faces the highest UK debt in 60 years.
10. Austria
Total debt per capita: $41,548
The Austrian economy improved strongly in H1 2022 but recently slowed down in Q3 2022. Despite the slowdown, the current deficit is expected to decrease from 5.9% in 2021 to 3.5% of GDP in 2022.
9. France
Total debt per capita: $46,421
According to the latest fiscal plans by the French government, France’s government debt / GDP seems to be stabilizing as the country’s budget indicates that in 2023, the budget deficit will decrease from 5% of GDP to around 3% in 2027.
8. Iceland
Total debt per capita: $46,565
Iceland was particularly hard hit by the 2008 crisis which led to a financial collapse. While the nation rebuilt, it is still among the countries with the highest debt per capita.
7. Ireland
Total debt per capita: $49,177
Ireland’s debt as a percentage of GDP is 55.6%. In 2009, the Irish debt was 65 billion euros, and it has spiraled since, when it more than doubled after the financial crash, which affected Ireland significantly. The Covid-19 pandemic also resulted in a significant increase in the debt, which stands at around 239 billion euros.
6. Italy
Total debt per capita: $50,347
As a percentage of GDP, Italy is well known for being among the most indebted nations in the world. It is similar to Japan in this regard but Japan’s debt is mostly in its own currency, while a large portion of Italy’s debt is owed in foreign currencies. In April 2022, Italy’s total debt ballooned to a record 2.8 trillion euros and its main issue currently is refinancing risks as the debts become due.
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Disclosure: None. 25 Countries That Have The Most Debt Per Capita is originally published at Insider Monkey.