Our interactive view of debt across the planet
Figures on debt often miss the point entirely. When talking about a country’s ‘debt’, newspapers refer to just the debt owed by its government. But this includes debts which are owed to citizens of that country (not necessarily a problem). And it ignores the debt owed by private companies and banks (which can be a problem). No single figure can capture all the issues with debt across the world. But in these maps we present some of those which are most important and - we think - will surprise you.
Overall International Debt Burden (% of GDP)
By showing both government debt and private debt, and how much a country owes as well as it is owed, our ‘net debt’ statistics better shows that crises are not simply created by debtors, but by creditors too. These figures show the debt owed to foreigners by the whole country – public and private sectors – minus the debt owed to them. For one country to be a net saver, another has to be a debtor.
Countries such as Norway, Saudi Arabia and Germany are traditionally seen as ‘morally superior’ to indebted countries for their credit surpluses. But they are just as responsible for debt crises in a world increasingly characterised by huge imbalances.
Large debts between countries create instability. In the 1970s large savings by oil-rich countries awash with money after high oil prices led to large debts in Latin America and Africa, with US, British and Japanese banks acting as a conduit for the money. When interest rates rose and commodity prices collapsed, the result was the Third World Debt crisis, with hundreds of millions of people impoverished. Similarly, the large debts owed by US and British banks across the world helped to precipitate the financial crisis when assets the banks claimed they had turned out to be worthless.
Amazingly, given their importance, no official organisation calculates these figures for all countries. As far as we are aware, this is the first time they have been presented together. However, particularly for some developing countries, there are few figures available on debts owed to and by the private sector, so these figures are the best we could find, rather than the whole story. Furthermore, these statistics do not take into account the huge amounts of illicit money which flood out of developing countries to tax havens and financial centres. Global Financial Integrity estimate that between $600 billion and $900 billion leaves developing countries in secret every year through multinational companies and corruption.
The map shows huge differences between countries. There are creditor countries such as China and Germany, which have effectively been lending countries money to buy their exports. This happens in very different ways. The Chinese government lends billions of dollars to the US, and other governments, through buying their bonds. Whereas in Germany, banks have previously lent money to banks in countries such as Spain, Greece and Ireland, fuelling booms, and now busts.
Government Foreign Debt (% of GDP)
This is the total foreign debt owed by a government, not taking into account any debts owed to it. This is an often-used figure for impoverished countries because so much of the ‘Third World’ debt crisis arose because governments owed so much money in foreign currency that they were unable to pay. This shows foreign debt can be much more dangerous than domestic debt, which a government can inflate away or even change the terms of the loan contract on. And payments on external debt leave the country, whilst domestic debt payments stay in the economy, to be spent elsewhere, some of which return to the government through tax.
For example, the Japanese government has the highest debt in the world, 235 per cent of national income. That is 70 percentage points more than Greece, and more than double the UK’s. But over 90 per cent of Japanese government debt is owed to Japanese people. This means the Japanese debt transfers money from taxpayers to savers - that might be an internal problem - but it doesn‘t cause Japan a debt problem with the rest of the world.
Private Foreign Debt (% of GDP)
Less talked about than government debt are the debt owed by private companies such as banks. Reckless lending and borrowing by banks can cause booms in assets such as house prices, increasing inequality, followed by busts resulting in unemployment and higher government debt.
This map shows the total foreign debt owed by a country’s private sector, not taking into account the debt owed to it. Many countries, particularly more impoverished ones, do not monitor these debts at all, and no figures exist for them. Money can flood in and out of the country at will, potentially fuelling tax avoidance, corruption and financial instability.
The total foreign debt owed by the private sector can dwarf that of governments, for example in Spain, Ireland, Iceland and the UK. Though the UK ranks 98th most indebted country in the world in the net debt league, its private sector debt is a massive 364 per cent of GDP, putting it fourth on that measure. This means the UK economy is in desperate need of reform - but not of the sort of austerity policies currently being imposed.
To some extent these debts can be matched by debts owed to banks and others from abroad. But even if this is the case, the total amount of money owed makes a country highly vulnerable to financial instability. For example, if a foreign bank is no longer able to pay a British bank its debts, what once were assets are wiped out, and the British bank is in trouble.
Private sector borrowing led to the East Asian financial crisis in the 1990s, which crashed economies and pushed people out of work and into poverty. In Thailand, poverty increased by 40 per cent. And at the start of the global financial crisis, countries such as Spain, Ireland, the UK, Iceland and Spain had far bigger private than public debts. Therefore, much more attention needs to be given to private debt. Many debt crises are private debt crisis. But presumably on the basis that ‘the private sector knows best’ too little attention is paid to this.
IMF and World Bank debt cancellation
This map shows the countries which have qualified for the IMF and World Bank debt relief scheme, known as HIPC.
In response to the global jubilee movement calls for debt cancellation and repudiation, western countries, through the IMF and World Bank, created a debt relief scheme known as the Heavily Indebted Poor Countries (HIPC) initiative. To be eligible for the scheme countries had to be very heavily indebted and very impoverished (with an annual income per person of less than £700). On entering the scheme, to qualify for debt relief, governments had to follow IMF and World Bank economic conditions, including water privatisation, selling off grain reserves, removing subsidies for farmers, and cutting public spending.
When the scheme was first launched in 1996 it simply reduced debts which could never be paid, but maintained debts at a high level. The few countries which qualified were soon back in debt crisis. The amount of debt relief was expanded, until in 2005 qualifying countries began to get most of their debts owed to the IMF, World Bank and Western governments cancelled. However, this was not cancellation of all their debt as debts to private companies were not included, and neither were new loans. Taking out loans from the IMF was a condition of the HIPC scheme, and much ‘aid’ continues to be given as loans through institutions like the World Bank and African Development Bank.
Countries have tended to take between 2 and 10 years to qualify for debt relief through the scheme, because of all the conditions they need to meet. As of June 2013, 35 countries have qualified for debt relief. A further six could be eligible, but only Chad has started the process, and none are likely to qualify anytime soon.
- Countries which have entered the HIPC initiative but not completed it: Chad
- Countries which are eligible to enter the HIPC initiative, but have not (yet): Eritrea, Nepal, Somalia, Sudan
- Countries which could be ruled to be eligible in the future: Zimbabwe
Statistics don’t explain many of the key facts about debt, including the way debt is used to prop-up regimes, fund arms exports and force countries to follow the will of others. These country case studies tell, in part, these stories, and how people have resisted oppression and worked for debt justice; a world where debt is no longer used as a form of power by which the rich exploit the poor.