The global economy is a complex web of financial transactions, investments, and debts.

In 2023, certain countries are facing an issue of significant External debts, raising concerns about their economic stability.

In this article, we will explore the top 10 countries facing the highest external debt, understand the reasons behind this, and look for the tips that can be followed to reduce the debt. 

What is External Debt?

External debt is the total amount of money that a country owes to foreign creditors.

This debt can result from loans, bonds, or other financial instruments obtained from outside the country.

It includes debt owed by the government, businesses, and individuals. External debt can be a major burden on a country’s economy, as it can limit its ability to grow and invest.

While a certain level of debt is normal for economic growth, excessively high external debt can strain a nation’s economy and financial stability.

Here are the top 10 countries with the highest external debt in 2023, according to the World Bank:

Countries With the Highest External Debt

United States: $32.9 trillion

Why USA’s External Debt Is So High?

The United States has the highest external debt in the world because of a number of factors, including trade deficits, government spending, and foreign investment.

The United States has been running trade deficits for many years, which means that it imports more goods and services than it exports.

This has led to a need to borrow money from foreign creditors to pay for the difference.

Additionally, the US government has been running budget deficits for many years, which has also contributed to the growth of external debt.

The United States is a major recipient of foreign investment, which can also lead to an increase in external debt. Also read – President Biden Announces Additional $9 Billion in Student Loan Forgiveness – Who Qualify?

Where USA Take the Debt?

The United States borrows money from a variety of sources, including foreign governments, central banks, and private investors.

How USA Use the debt fund?

The US government uses the money it borrows to fund its various programs and activities, such as national defence, social security, and healthcare.

The government also uses borrowed money to finance infrastructure projects and other investments.

China: $17.3 trillion

Why China’s External Debt Is So High?

China has the second-highest external debt in the world because of a number of factors, including trade surpluses, government spending, and foreign investment.

China has been running trade surpluses for many years, which means that it exports more goods and services than it imports.

This has led to an accumulation of foreign currency reserves, which the Chinese government has invested in foreign assets.

The Chinese government has been spending heavily on infrastructure and other investments.

China is a major recipient of foreign investment.

Where China Take the Debt?

China borrows money from a variety of sources, including foreign governments, central banks, and private investors.

How does China Use the debt Fund?

The Chinese government uses the money it borrows to fund its various programs and activities, such as infrastructure development, industrial development, and social programs.

Japan: $12.3 trillion

Why Japan’s External Debt Is So High?

Japan has the third-highest external debt in the world because of a number of factors, including trade deficits, government spending, and an ageing population.

Japan has been running trade deficits for many years, which means that it imports more goods and services than it exports.

Additionally, the Japanese government has been running budget deficits for many years, which has also contributed to the growth of external debt.

Japan has an ageing population, which has led to increased government spending on social programs.

Where did Japan Take the Debt?

Japan borrows money from a variety of sources, including foreign governments, central banks, and private investors.

How Japan Used the Debt Fund?

The Japanese government uses the money it borrows to fund its various programs and activities, such as social programs, infrastructure development, and debt servicing.

Germany: $5.67 trillion

Why Germany’s External Debt Is So High?

Germany has the fourth-highest external debt in the world because of a number of factors, including trade surpluses, government spending, and foreign investment.

Germany has been running trade surpluses for many years, which means that it exports more goods and services than it imports.

This has led to an accumulation of foreign currency reserves, which the German government has invested in foreign assets.

Additionally, the German government has been spending heavily on infrastructure and other investments.

So Germany is a major recipient of foreign investment.

Where Germany Take the Debt?

Germany borrows money from a variety of sources, including foreign governments, central banks, and private investors.

How Germany Uses the Debt Fund?

The German government uses the money it borrows to fund its various programs and activities, such as infrastructure development, industrial development, and social programs.

United Kingdom: $4.56 trillion

Why United Kingdom External Debt Is So High?

The United Kingdom has the fifth-highest external debt in the world because of a number of factors, including trade deficits, government spending, and foreign investment.

The United Kingdom has been running trade deficits for many years, which means that it imports more goods and services than it exports.

Additionally, the UK government has been running budget deficits for many years, which has also contributed to the growth of external debt.

Where United Kingdom Take the Debt?

The United Kingdom borrows money from a variety of sources, including foreign governments, central banks, and private investors.

How United Kingdom Use the debt fund?

The UK government uses the money it borrows to fund its various programs and activities, such as social programs, infrastructure development, and debt servicing.

France: $3.45 trillion

Why France’s External Debt Is So High?

France has the sixth-highest external debt in the world because of a number of factors, including trade deficits, government spending, and foreign investment.

France has been running trade deficits for many years, which means that it imports more goods and services than it exports.

Additionally, the French government has been running budget deficits for many years, which has also contributed to the growth of external debt.

Where France Take the Debt?

France borrows money from a variety of sources, including foreign governments, central banks, and private investors.

How does France Use the debt fund?

The French government uses the money it borrows to fund its various programs and activities, such as social programs, infrastructure development, and debt servicing.

Italy: $2.34 trillion

Why Italy’s External Debt Is So High?

Italy has the seventh-highest external debt in the world because of a number of factors, including trade deficits, government spending, and an ageing population.

Italy has been running trade deficits for many years, which means that it imports more goods and services than it exports.

Additionally, the Italian government has been running budget deficits for many years, which has also contributed to the growth of external debt.

Italy has an ageing population, which has led to increased government spending on social programs.

Where Italy Take the Debt?

Italy borrows money from a variety of sources, including foreign governments, central banks, and private investors.

How does Italy Use the debt fund?

The Italian government uses the money it borrows to fund its various programs and activities, such as social programs, infrastructure development, and debt servicing.

Canada: $1.23 trillion

Why Canada’s External Debt Is So High?

Canada has the eighth-highest external debt in the world because of a number of factors, including trade deficits, government spending, and foreign investment.

Canada has been running trade deficits for many years, which means that it imports more goods and services than it exports.

Additionally, the Canadian government has been running budget deficits for many years, which has also contributed to the growth of external debt.

Where Does Canada Take the Debt?

Canada borrows money from a variety of sources, including foreign governments, central banks, and private investors.

How does Canada Use the debt fund?

The Canadian government uses the money it borrows to fund its various programs and activities, such as social programs, infrastructure development, and debt servicing.

Spain: $0.98 trillion

Why Spain’s External Debt Is So High?

Spain has the ninth-highest external debt in the world because of a number of factors, including trade deficits, government spending, and the 2008 financial crisis.

Spain has been running trade deficits for many years, which means that it imports more goods and services than it exports.

Additionally, the Spanish government has been running budget deficits for many years, which has also contributed to the growth of external debt.

The 2008 financial crisis had a major impact on the Spanish economy, which led to increased government spending and a decline in tax revenue.

Where Spain Take the Debt?

Spain borrows money from a variety of sources, including foreign governments, central banks, and private investors.

How does Spain Use the debt fund?

The Spanish government uses the money it borrows to fund its various programs and activities, such as social programs, infrastructure development, and debt servicing.

Brazil: $0.76 trillion

Why Brazil’s External Debt Is So High?

Brazil has the tenth-highest external debt in the world because of a number of factors, including trade deficits, government spending, and a recession.

Brazil has been running trade deficits for many years, which means that it imports more goods and services than it exports.

Additionally, the Brazilian government has been running budget deficits for many years, which has also contributed to the growth of external debt.

Brazil experienced a recession in 2015-2016, which led to increased government spending and a decline in tax revenue.

Where Brazil Take the Debt?

Brazil borrows money from a variety of sources, including foreign governments, central banks, and private investors.

How does Brazil Use the debt Fund?

The Brazilian government uses the money it borrows to fund its various programs and activities, such as social programs, infrastructure development, and debt servicing.

Why is external debt growing?

There are a number of factors that can contribute to the growth of external debt. Some of the most common factors include:

Trade deficits: When a country imports more goods and services than it exports, it runs a trade deficit. This means that the country needs to borrow money from foreign creditors to pay for the difference.

Government spending: When a government spends more money than it collects in taxes, it runs a budget deficit. This can also lead to an increase in external debt.

Foreign investment: When businesses and individuals from other countries invest in a country, this can lead to an increase in external debt.

Economic shocks: Economic shocks, such as recessions and natural disasters, can also lead to an increase in external debt.

What are the consequences of high external debt?

High external debt can have a number of negative consequences for a country’s economy. It can:

Limit economic growth: High external debt can limit economic growth by reducing the amount of money that is available for investment.

Increase the risk of financial crisis: High external debt can also increase the risk of a financial crisis.

If a country is unable to repay its debt, it could default on its loans, which could lead to a loss of confidence in the country’s economy and a decline in the value of its currency.

Make a country more vulnerable to external shocks: High external debt can also make a country more vulnerable to external shocks, such as changes in interest rates and exchange rates.

What can be done to reduce external debt?

There are a number of things that can be done to reduce external debt. Some of the most common measures include:

Export promotion: Governments can promote exports by providing incentives to businesses that export goods and services.

This can help to reduce trade deficits and improve the country’s balance of payments.

Fiscal consolidation: Governments can also reduce external debt by reducing their budget deficits. This can be done by cutting spending or increasing taxes.

Debt restructuring: Governments can also negotiate with their creditors to restructure their debt.

This can involve reducing the amount of debt that the country owes, extending the repayment period, or reducing the interest rate on the debt.

External debt can be a major burden on a country’s economy.

However, there are a number of things that can be done to reduce external debt, such as export promotion, fiscal consolidation, and debt restructuring.

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