30 Countries That have the Most External Debt
In this article, we will be taking a look at the 30 countries that have the most external debt. To skip our detailed analysis, you can go directly to see the 5 countries that have the most external debt.
While all countries are facing enormous pressure because of rising interest rates, the countries with the highest external debt are dealing with an even bigger crisis due to higher payments as a result of higher interest payments. Often, countries as well as corporations are judged incorrectly for dealing with debt, as the traditional view has been that debt = bad. However, the correct use of debt can easily allow for better use of investment, not to mention a higher rate of return as compared to interest payments. In fact, this is exactly why countries and corporations alike have been talked advantage of rock-bottom interest rates in recent year to snap up debt, and invest it in areas where the rate of return is higher than the cost of borrowing. This is also why many major companies, especially the profitable ones, can also be among the most indebted companies in the world.
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Of course, there is always a risk that companies bet on when they go for debt; namely, that interest rates won't rise suddenly and sharply. Unfortunately, that is exactly what happened in 2022, when the Fed consistently hiked interest rates in a bid to control inflation. Because of this hike, many companies have been hard hit, mirroring the impact of the countries that have the most external debt. This is also why interest coverage ratio, which calculates how many times a company can pay off its interest based on its profit, and is generally calculated as earnings before interest, tax, depreciation and amortization divided by interest expense, is considered to be especially relevant for highly leveraged companies where net debt can be significantly high and can indicate a company's liquidity or lack there-of.
Higher interest, combined with the U.S. dollar strengthening significantly against most global currencies, has even resulted in some nations defaulting on their debt. While the U.S. has the total highest external debt in the world, being the strongest economy in the world has the trust of most nations even if its debt continues to rise amid higher interest payments. However, the U.S. also nearly defaulted on its debt due to the debt ceiling impasse which was resolved in May 2023, but definitely worried the countries that own the most U.S. debt, with most nations investing in U.S. government securities precisely because of their stability and safety.
According to the IMF, monetary policy being tightened by nations resulted in higher interest rates for the first time in several decades in the most advanced countries in the world. However, the organization concluded by stating "Overall, our analysis suggests that recent increases in real interest rates are likely to be temporary. When inflation is brought back under control, advanced economies’ central banks are likely to ease monetary policy and bring real interest rates back towards pre-pandemic levels. How close to those levels will depend on whether alternative scenarios involving persistently higher government debt and deficits, or financial fragmentation materialize. In large emerging markets, conservative projections of future demographic and productivity trends suggest a gradual convergence towards advanced economies’ real interest rates.", which will be great news for the countries with the highest external debt in the world.
That will also be great news for highly leveraged companies, which have struggled with interest expense payments in the last year amid interest rate hikes. Generally, companies involved in industries which require a high amount of infrastructure or capital investment tend to be highly leveraged, including the automotive sector. Additionally, growth companies whose valuation is based on future cashflows are also negatively impacted by debt as future cashflows are discounted at a higher interest rate to arrive at net present value of a company. One of the biggest car companies in the world in Toyota Motor Corporation (NYSE:TM) saw its operating profit plunge by 25% in Q2 2023 based on yen volatility and rising interest rates in the U.S. Toyota Motor Corporation (NYSE:TM) mentioned this in the company's Q2 2023 earnings call stating "First, let me provide a summary of the second quarter of the fiscal year ending March 2023. The result for the first half was operating income of ￥1,141.4 billion, the business environment is changing dramatically such as the rapid changes of foreign exchange rates, raising interest rate, soaring materials prices and more." The company went on to state "However, because of recent sudden interest rate changes that the suppliers are telling us that they are struggling. From the viewpoint of protecting the suppliers, this time, we decided to take measures. So we will continue to look at the market production status and the profitability of our suppliers in detail to take the necessary responses. So we are taking these responses, but the effects will have to be permeated to all suppliers because of the commercial practices."
In order to protect themselves from the risks of rising interest rates, many highly leveraged companies enter into interest rate swaps. This is exactly what Ford Motor Company (NYSE:F) did to manage its debt, even as its profits and performance has been impacted by higher interest rates. The company mentioned in its Q2 2023 earnings call stating "Our rent-adjusted leverage ratio as defined by our US syndicated credit facility was 2.1 times at the end of June. Our strong balance sheet will continue to allow for meaningful and balanced capital deployment. Our quarterly floorplan interest of $15.6 million, was an increase of $9.7 million from the prior year, entirely due to higher vehicle inventory holdings. We effectively managed our floorplan interest expense by holding excess cash on our floorplan offset accounts, reducing the balance exposed to interest as well as to our portfolio of interest rate swaps, which saved us $4.7 million in interest expense versus the comparable prior year quarter." The impact of higher interest rates on profits has been reflected in investor guidance as well, and here is what Leaven Partners has to say about Ford Motor Company (NYSE:F) in its Q3 2022 investor letter:
“In our last quarterly letter, I briefly mentioned that the consensus estimates for corporate profits appeared to be a bit too sanguine. I referenced a Reuters article that reported, as of June 17, Wall Street expected S&P 500 earnings to grow by 9.6% in 2022, which was up from 8.8% in April and from 8.4% in January. That tune began to change at the end of July and accelerated in August and September, as major players, such as Ford (NYSE:F), has recently issued profit warnings and/or have withdrawn guidance. In response, Wall Street has altered its outlook: lowering third-quarter profit growth to 4.6%[2] from 7.2% in early August and slashing full-year profit growth to 4.5%.”
Methodology
To determine the countries that have the most external debt, we checked their total external debt from CEIC. For the countries with the highest total external debt, we then used their latest population statistics to determine external debt per capita. We then assigned 70% to the first criterion and 30% to the other, since a country's total external debt is a more important indicator but not the only one. This is why the U.S., which has the highest external debt in the world by a long shot, doesn't come anywhere near first in our list.
30. Qatar
Total external debt (in $m): 194,500
Total external debt per capita (in $): 72,167
Qatar's banks have seen external debt build up over the past few years, and changing economic conditions globally amid tightening of fiscal monetary policies could impact Qatar's external funding stability.
29. New Zealand
Total external debt (in $m): 206,008
Total external debt per capita (in $): 40,204
Despite already owing significant external debts, New Zealand is expected to borrow $35 billion more than was initially expected and interest rates are continuing to rise in the country.
28. Cyprus
Total external debt (in $m): 179,352
Total external debt per capita (in $): 143,311
Cyprus being one of the countries that have the most external debt doesn't bode well for the country and according to IMF, higher rates of inflation and interest could put in doubt the nation's ability to pay back interest on time.
27. Hungary
Total external debt (in $m): 294,395
Total external debt per capita (in $): 30,402
Hungary's debt jumped from 54% of GDP in 2019 to over 80% of GDP in 2022, and high external debt combined with currency fluctuations could put Hungary in a precarious position.
26. China
Total external debt (in $m): 2,452,765
Total external debt per capita (in $): 1,737
Despite being the second-largest economy in the world, China's debt is really not that high especially considering its debt per capita. Most of China's debt is actually state-owned as state-controlled banks provide loans to state-owned companies.
25. Mauritius
Total external debt (in $m): 199,334
Total external debt per capita (in $): 157,885
While its total debt is not much, Mauritius has a really high external debt per capita even as debt-service payments put the biggest squeeze on poor countries in the 21st century, according to the World Bank.
24. Portugal
Total external debt (in $m): 440,826
Total external debt per capita (in $): 42,473
Portugal is home to one the heaviest debt burdens in Europe and in 2023, aimed to slash its debt ratio to lower that of Spain and France.
23. South Korea
Total external debt (in $m): 664,986
Total external debt per capita (in $): 12,880
South Korea is among the countries with the highest external debt and its increasing household debt is a real issue for the economy.
22. Greece
Total external debt (in $m): 584,879
Total external debt per capita (in $): 55,352
Greece's debt crisis has been well-known for over a decade which resulted in the longest recession ever suffered by an advanced mixed economy. However, improvements were seen in recent years and in 2022, the EU committed to not watching over Greece's budget after the latter fulfilled fiduciary responsibilities.
21. Denmark
Total external debt (in $m): 500,762
Total external debt per capita (in $): 84,831
In 2017, Denmark paid off all its foreign currency debts for the first time in the country's history. However, its current external debt is still significantly high and has a AAA rating from Moody's.
20. Finland
Total external debt (in $m): 609,009
Total external debt per capita (in $): 109,596
Finland has a really high external debt, but also a public debt that is breaching EU thresholds. EU threshold state that public debt should not exceed 60% of GDP and Finland's public debt has crossed 73%.
19. Austria
Total external debt (in $m): 713,740
Total external debt per capita (in $): 78,931
Austria and Finland were the biggest opponents of a European attempt to increase debt and Austrian Chancellor Karl Nehammer said "No new fund", stating that relying on the existing 2020 debt should be sufficient.
18. Sweden
Total external debt (in $m): 1,012,575
Total external debt per capita (in $): 96,556
While it's counted among the most developed countries in the world, Sweden had to engage in external borrowings to built its infrastructure, including railways and hydropower, which make up a significant portion of its total debt.
17. Norway
Total external debt (in $m): 754,101
Total external debt per capita (in $): 138,186
While Norway is among the countries which have the most external debt, it is still in a net asset position, which means that government assets outweigh total debt owed.
16. Australia
Total external debt (in $m): 1,851,277
Total external debt per capita (in $): 71,261
Australia's currency has been depreciating against the USD recently, further adding pressure to Australia's external debt commitments, and has played a part in triggering a minor external debt crisis.
15. Belgium
Total external debt (in $m): 1,410,889
Total external debt per capita (in $): 120,905
European countries dominate our list of nations with the most external debt in the world and Belgium is also among the countries with the highest debt to GDP ratios in the world.
14. Spain
Total external debt (in $m): 2,494,889
Total external debt per capita (in $): 52,397
Spain was recently asked by the European Commission to limit its public fiscal spending in 2024 in order to reach financial targets. Even then, Spain has been credited with helping Morocco get off the FATF's grey list and improve its ability to seek additional debt.
13. Italy
Total external debt (in $m): 2,726,013
Total external debt per capita (in $): 46,316
Italy's familiar debt issues resurfaced again recently and has impacted its negotiating power amid discussions with the EU.
12. Canada
Total external debt (in $m): 2,652,714
Total external debt per capita (in $): 68,141
Canada's household debt is now higher than its entire GDP and the highest of any nation in the G7, with the blame mainly assigned to higher home prices.
11. Hong Kong
Total external debt (in $m): 1,819,706
Total external debt per capita (in $): 247,711
You will see many financial hubs in our list as the presence of large financial institutions with significant leveraged positions is counted towards the country's total external debt and Hong Kong is no exception.
10. Japan
Total external debt (in $m): 4,543,036
Total external debt per capita (in $): 36,308
While Japanese investors sold off foreign debts in 2022 in record amounts amid interest rates hike, they have now resumed a foreign debt purchasing spree. Japan also tops the list of countries with the highest debt to GDP ratio.
9. Singapore
Total external debt (in $m): 1,851,236
Total external debt per capita (in $): 328,407
Singapore is considered to be the financial capital of Asia and with the presence of many major finance companies with large debt holdings, it is unsurprising that Singapore is among the world's highest external debt countries.
8. Switzerland
Total external debt (in $m): 2,297,161
Total external debt per capita (in $): 261,942
Switzerland allocated nearly 40 million CHF to support developing nations struggling massively under external debt constraints but has been accused of not doing enough to help out.
7. Germany
Total external debt (in $m): 6,460,684
Total external debt per capita (in $): 76,840
Most advanced Western economies are counted among the countries which have the most external debt and Germany is one of them, with the 4th highest total external debt overall.
6. United States
Total external debt (in $m): 24,544,393
Total external debt per capita (in $): 73,643
The U.S. has the highest total external debt of any country by far, almost at the same level of the next three largest total external debt holders combined. While the U.S. avoided a debt default after a compromise was reached between Democrats and Republicans, it still faces higher interest payments because of the current economic scenario.
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Disclosure: None. 30 countries that have the most external debt is originally published on Insider Monkey.