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Thursday, July 7, 2022

US, Japan Among Highest Indebted Countries

Countries have taken on new debt since COVID-19 started to spread around the world in 2020, resulting in the highest global debt levels in half a century, with the United States of America (USA), Japan, Italy and Spain among the first top 10 countries with the most national debts.

International Monetary Fund’s (IMF’s) World Economic Outlook database quoted by the World Population Review (WPR) said Japan, Sudan, and Greece top the list with debt-to-GDP ratios well above 200%, followed by Eritrea (175%), Cape Verde (160%), and Italy (154%).

According to the US Census Bureau, which is an independent organisation, Japan, with its population of 127,185,332, has the highest national debt in the world at 234.18% of its GDP, followed by Greece at 181.78%.

It reported that Japan’s national debt currently sits at ¥1,028 trillion ($9.087 trillion USD), adding that after the stock market crashed in Japan, the government bailed out banks and insurance companies and provided them with low-interest credit.

“Banking institutions had to be consolidated and nationalised after a period of time, and other fiscal stimulus initiatives were used to help reboot the struggling economy. Unfortunately, these actions caused Japan’s debt level to skyrocket,” the WPR stated.

It said the US, with a debt ratio of 106.70% is in 13th position in the world with a national debt of $19.23 trillion as against 133.43% of Italy ($2.48 trillion) and 119.46% of Portugal ($264 billion).

The report noted that Russia’s debt ratio is one of the lowest in the world at 19.48% of its GDP, and it is the ninth least indebted country in the world, with a total debt of over 14 billion руб ($216 billion USD).

Ghana

Ghana placed 63rd on the global debt, with a national debt to GDP ratio of 61.99% behind Senegal’s ratio of 62%, Morocco’s 65.11%, Togo’s 70.39%, Gambia’s 78.67%, and Mozambique’s debt to GDP ratio of 124.46%.

The WPR’s report said Ghana’s population will continue to grow the rest of the century, reaching 78.71 million people in 2099, according to current projections, explaining that “this means that Ghana will more than double its current population of 31.07 million people over the next 80 years.”

Ghana is currently growing at a rate of 2.15% per year, which has slowly decreased from 2.95% in 1985, but still remains high. The main cause of this growth is Ghana’s high fertility rate of 3.89 births per woman and the country’s efforts to minimise birth mortalities.

Ghana’s population growth is alarming to experts, as the country is not equipped to handle the dramatically increased needs for food, water, sanitation, education, and employment that comes with a rapidly growing population. Efforts to slow the population growth are rooted in family planning, which would reduce the number of births or help families properly space out births.

Economic Giants

It said Canada’s national debt is currently at 83.81% of its GDP and currently sits at about $1.2 trillion CAD ($925 billion USD), adding that Canada experienced a gradual decrease in debt after the 1990s until 2010 when the debt began increasing again.

Germany, which is Europe’s largest economy, has a debt ratio currently at 59.81% of its GDP. It indicated that Germany’s total debt is at approximately €2.291 trillion ($2.527 trillion USD).

WPR said China’s national debt is currently 54.44% of its GDP, a significant increase from 2014 when the national debt was at 41.54% of China’s GDP. China’s national debt is currently over ¥38 trillion (over $5 trillion USD).

An International Monetary Fund report from 2015 stated that China’s debt is relatively low, and many economists have dismissed worries over the size of the debt both in its overall size and relative to China’s GDP. China currently has the world’s largest economy and the largest population of 1,415,045,928 people.

Main Risk

It asserted that a rapid increase in government debt is a major cause for concern, intimating that generally, the higher a country’s debt-to-GDP ratio is, the higher chance that country could default on its debt, therefore creating a financial panic in the markets.

By Ernest Kofi Adu

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