economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services. ...
, the debt-to-GDP ratio is the
ratio In mathematics, a ratio indicates how many times one number contains another. For example, if there are eight oranges and six lemons in a bowl of fruit, then the ratio of oranges to lemons is eight to six (that is, 8∶6, which is equivalent to ...

between a country's government debt (measured in units of currency) and its
gross domestic product Gross domestic product (GDP) is a money, monetary Measurement in economics, measure of the market value of all the final goods and services produced in a specific time period. List of countries by GDP (nominal) per capita, GDP (nominal) per capit ...
(GDP) (measured in units of currency per year). A low debt-to-GDP ratio indicates an economy that produces and sells goods and services is sufficient to pay back debts without incurring further debt. Geopolitical and economic considerations – including interest rates, war,
recession In economics, a recession is a business cycle contraction when there is a general decline in economic activity. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be triggered by various eve ...
s, and other variables – influence the borrowing practices of a nation and the choice to incur further
debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase. The deb ...

. It should not be confused with a deficit-to-GDP ratio, which, for countries running budget deficits, measures a country's annual net fiscal loss in a given year ( total expenditures minus total revenue, or the net change in debt per annum) as a percentage share of that country's GDP; for countries running budget surpluses, a ''surplus-to-GDP ratio'' measures a country's annual net fiscal ''gain'' as a share of that country's GDP.

Global statistics

At the end of the 3rd quarter of 2020, the United States public debt-to-GDP ratio was 127.3%.Federal Debt: Total Public Debt as Percent of Gross Domestic Product
Federal Bank of St. Louis.
The level of public debt in Japan was 246.1% of GDP, in China 46.7% and in India 61.8%, in 2017 according to the IMF, while the public debt-to-GDP ratio at the end of the 2nd quarter of 2016 was at 70.1% of GDP in Germany, 89.1% in the United Kingdom, 98.2% in France and 135.5% in Italy, according to
Eurostat Eurostat (European Statistical Office) is a Directorate-General Within the European Union, directorates-general are departments of the European Union government with specific zones of responsibility, the equivalent of Ministry (government depart ...
. Two-thirds of US public debt is owned by US citizens, banks, corporations, and the Federal Reserve Bank; approximately one-third of US public debt is held by foreign countries – particularly China and Japan. Conversely, less than 5% of Italian and Japanese public debt is held by foreign countries. Particularly in
macroeconomics Macroeconomics (from the Greek prefix ''makro-'' meaning "large" + ''economics'') is a branch of economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), producti ...
, various debt-to-GDP ratios can be calculated. The most commonly used ratio is the government debt divided by the gross domestic product (GDP), which reflects the government's finances, while another common ratio is the total debt to GDP, which reflects the finances of the nation as a whole.


The change in debt-to-GDP is approximately "net change in debt as percentage of GDP"; for government debt, this is deficit or ( surplus) as percentage of GDP. This is only approximate as GDP changes from year to year, but generally, year-on-year GDP changes are small (say, 3%), and thus this is approximately correct. However, in the presence of significant
inflation In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of go ...
, or particularly
hyperinflation 400px, Hyperinflation in Venezuela represented by the time it would take for money to lose 90% of its value (301-day rolling average, inverted logarithmic scale). In economics, hyperinflation is very high and typically accelerating inflation. I ...
, GDP may increase rapidly in nominal terms; if debt is nominal, then its ratio to GDP will decrease rapidly. A period of
deflation In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods ...
would have the opposite effect. A government's debt-to-GDP ratio can be analysed by looking at how it changes or, in other words, how the debt is evolving over time: \frac - \frac=(r-g)\left(\frac\right)+\left(\frac\right) The left hand side of the equation demonstrates the dynamics of the government's debt. \frac is the debt-to-GDP at the end of the period , and \frac is the debt-to-GDP ratio at the end of the previous period (−1). Hence, the left side of the equation shows the ''change'' in the debt-to-GDP ratio. The right hand side of the equation shows the causes of the government's debt. (r-g)(\frac) is the interest payments on the stock of debt as a ratio of GDP so far, and \frac shows the primary deficit-to-GDP ratio. If the government has the ability to print money, and therefore Monetizing debt, monetize the outstanding debt, the budget constraint becomes: \left(\frac - \frac\right)+\left(\frac-\frac\right) =(r-g)\left(\frac\right)+\left(\frac\right) The term \frac-\frac is the change in money balances (i.e. money growth). By printing money the government is able to increase nominal money balances to pay off the debt (consequently acting in the debt way that debt financing does, in order to balance the government's expenditures). However, the effect that an increase in nominal money balances has on Seigniorage, seignorage is ambiguous, as while it increases the amount of money within the economy, the real value of each unit of money decreases due to inflationary effects. This inflationary effect from money printing is called an inflation tax.


Debt-to-GDP measures the financial leverage of an economy. One of the Euro convergence criteria was that government debt-to-GDP should be below 60%. The World Bank and the IMF hold that "a country can be said to achieve external debt sustainability if it can meet its current and future external debt service obligations in full, without recourse to debt rescheduling or the accumulation of arrears and without compromising growth". According to these two institutions, external debt sustainability can be obtained by a country "by bringing the net present value (NPV) of external public debt down to about 150 percent of a country's exports or 250 percent of a country's revenues". High external debt is believed to have harmful effects on an economy. The United Nations Sustainable Development Goal 17, an integral part of the Sustainable Development Goals, 2030 Agenda has a target to address the external debt of highly indebted poor countries to reduce debt distress. In 2013 Thomas Herndon, Herndon, Ash, and Robert Pollin, Pollin reviewed an influential, widely cited research paper entitled, "Growth in a Time of Debt", by two Harvard economists Carmen Reinhart and Kenneth Rogoff. Herndon, Ash and Pollin argued that "coding errors, selective exclusion of available data, and unconventional weighting of summary statistics lead to serious errors that inaccurately represent the relationship between public debt and GDP growth among 20 advanced economies in the post-war period". Correcting these basic computational errors undermined the central claim of the book that too much debt causes recession. Rogoff and Reinhardt claimed that their fundamental conclusions were accurate, despite the errors. There is a difference between external debt denominated in domestic currency, and external debt denominated in foreign currency. A nation can service external debt denominated in domestic currency by tax revenues, but to service foreign currency debt it has to convert tax revenues in the foreign exchange market to foreign currency, which puts downward pressure on the value of its currency.

See also

* Economic bubble * Debt levels and flows * Leverage (finance) * List of countries by public debt * List of countries by external debt * List of countries by tax revenue to GDP ratio


{{Reflist Government debt Financial ratios