National Debt

The national debt is the total amount a country's central government owes to its creditors at a point in time. It is the accumulated result of past budget deficits, minus any surpluses, and takes the form of bonds, bills, loans and other obligations. It is also called the public debt, government debt or sovereign debt, although statisticians draw distinctions between these terms depending on which levels of government are included.

The national debt is a stock, while the yearly deficit in the government budget is a flow that adds to it. It is usually compared with GDP to give the debt-to-GDP ratio, which allows comparisons across countries and over time. Debt owed to residents is domestic debt; debt owed to foreigners is part of a country's external debt.

A national debt is like the total balance on a household's mortgage and loans, added up across every year the family borrowed. What matters is not only the size of the balance but the family's income, the interest rate it pays and whether its earnings are rising. A large mortgage can be comfortable for a family on a growing salary, and a small one can be a burden for a family whose income is shrinking.

One big difference is that a government does not retire or die, so it can roll its loans over indefinitely as long as lenders trust it. Another is that much of the debt is owed to its own citizens, pension funds and banks, who hold it as a safe savings product.

Several measures are in use, and figures differ widely depending on which one is quoted.

• Gross debt. Everything the government owes. US "total public debt outstanding" passed $38 trillion for the first time on 21 October 2025, according to US Treasury data.
• Debt held by the public. In the United States this excludes debt one part of government owes another, such as the trust funds of Social Security, and is the measure most economists use.
• Net debt. Gross debt minus liquid financial assets. The UK's headline measure, public sector net debt, is published monthly by the Office for National Statistics.
• General government debt. Includes state and local governments; it is the basis of international comparisons by the IMF and of the EU's 60% of GDP reference value.

Japan has the highest ratio among large advanced economies, at well over 200% of GDP on IMF figures, yet most of it is held domestically, much of it by the Bank of Japan. The IMF's October 2025 Fiscal Monitor projected that global public debt would exceed 100% of world GDP by 2029.

Governments borrow mainly by selling treasury securities: short-term treasury bills and longer government bonds such as US Treasury notes and bonds, UK gilts or Pakistan Investment Bonds. Holders include domestic banks, pension funds and insurers, households through national savings schemes, foreign central banks and investors, and the home central bank, whose holdings grew sharply through quantitative easing. Some countries also owe money to the IMF, the World Bank and other governments.

A debt is sustainable if the government can keep servicing it without an implausible fiscal effort or a default. The key drivers are the primary balance, the interest rate on the debt and the growth rate of the economy. When the interest rate exceeds growth, a country must run primary surpluses just to keep the ratio steady. Other risk factors include a large share of foreign-currency debt, short maturities that must be refinanced often, and weak institutions. Where debt becomes unpayable the outcome can be sovereign default, restructuring or rescheduling, as in Greece in 2012, Argentina several times, and Sri Lanka and Ghana in 2022. Credit rating agencies grade sovereign borrowers on these factors.

Historical experience shows that very high debt can come down. The UK's debt exceeded 250% of GDP after the Second World War and was reduced over decades through growth, modest surpluses, inflation and low interest rates, a mix sometimes called financial repression.

• Burden on future generations. Critics argue that debt shifts costs to future taxpayers and can cause crowding out of private investment.
• Debt as a policy tool. Keynesian economists argue that borrowing in a slump supports output, and that investment in productive assets can pay for itself.
• Monetary sovereignty. Advocates of Modern Monetary Theory contend that a government borrowing in its own currency cannot be forced to default, and that inflation is the real constraint; most mainstream economists dispute how far this holds.
• Household expectations. Under Ricardian equivalence, how a government finances spending matters less than many assume, because households anticipate future taxes.

In the United States a statutory debt limit, raised by $5 trillion in July 2025, adds periodic political standoffs to the debate.

• U.S. Treasury Fiscal Data: Debt to the Penny
• International Monetary Fund: Fiscal Monitor