In this article, we take a look at the 25 countries with the lowest debt to GDP ratios.

Debt Ratio Swings

Global debt is surging. The year 2020 saw these debts rising by 30 percentage points to 263% of GDP, marking the single most significant increase since the 1970s. World Bank notes that this surge is primarily due to rising interest rates, high inflation, and slow economic growth. Advanced economies saw debt increase by 300% of GDP while Emerging markets and Developing Economies (EMDA) saw a rise of 200% in GDP. Moreover, research on developing economies showed that debts have been rising for them, too, mainly due to sustained primary deficits.

The following year has witnessed global debt sustained at above pre-pandemic levels. However, IMF reports total public and private debt to have fallen by 10 percentage points to 247% of GDP. Debt ratio swings can largely be attributed to the economic rebound from the pandemic as well as the inflation that followed. The falls in public and private debt have been mainly experienced in advanced economies, with a fall of 5% of GDP in 2021. Emerging markets, except for China, also marked a decline. However, low-income developing countries continue to experience high debt levels primarily due to higher private debts.

In fact, almost 60% of low-income countries have already gone into or are at a high risk of debt distress. December 2021 also saw IMF’s Catastrophe Containment and Relief Trust (CCRT) lending coming to an end. Coupled with rising interest rates, borrowing costs have been increasing significantly, pressing national budgets and making it increasingly difficult for countries to service their debts.

Debt Carrying Capacities

Due to strong growth and high inflation, debt-to-GDP ratios have steadily declined for most advanced and EMDI economies. When these two factors come into play, they tend to improve nominal incomes that are subject to taxation. Therefore, governments with higher inflation pushed with rapid growth are at a higher chance of raising revenues and meeting obligations than those without. These economies are said to have larger debt-carrying capacities.

As a result, advanced economies generally have the capacity to sustain higher ratios of debt to GDP. Developing countries lack such capacities owing to credit rating downgrades that such high ratios bring them. Coupled with capital inflow withdrawals, local currency values plummet and worsen the overall economic situation of such economies.

Considering this backdrop, it must be noted that 2023 will be characterized by slow growth and tightening financial conditions. This situation is rather risky as servicing debt is becoming costlier for countries. As of 2022, 23 EMDEs were at risk of or already going into debt distress. Moreover, global growth is likely to plunge this year at 1.6%. As a result, governments would need more than just economic growth to lower their debt levels.

Many countries have been keeping their debt-to-GDP ratios low owing to their robust fiscal policies, strong economic growth, and even resilient risk management. Even though outliers such as Palestine, Congo, and even Afghanistan exist who depend on grants and loan proceeds or have both their GDP and debt levels low, other countries are proving they have resilient economies otherwise.

Methodology

To compile the list of 25 countries with the lowest debt-to-GDP ratio, we used statistics from Trading Economics. Countries were then listed in descending order from highest to lowest debt to GDP ratio.

25. Ethiopia

Debt to GDP ratio: 31.4

Ethiopia’s economy is on the verge of collapse with dire need of debt restructuring and loans from IMF. World Bank notes GDP worth US $111.27 billion as of 2021. Moreover, national debt stood at US $43.04 as of 2021.

24. Denmark

Debt to GDP ratio: 30.1

Denmark’s state debt remains at its lowest levels despite the pandemic, Central Bank notes. Its debt has been shrinking due to a budget surplus in 2022. This surplus was then used to pay off a large portion of its borrowing. Its debt levels as of 2022 stood at $120.1 billion, while its GDP amounted to $390.68 billion.

23. Saudi Arabia

Debt to GDP ratio: 30

Saudi Arab has successfully pursued a sustainable and well-structured debt strategy coupled with robust risk management over the years. The Kingdom has been heavily reliant on oil but has also been striving for economic diversification. Its debt strategy includes diversifying its investors, implementing higher risk management standards, as well as improving risk-based prices of issuances.

22. Guatemala

Debt to GDP ratio: 30

Guatemala’s public debt, as of 2021, was $26,458 million. The country has been enjoying stable growth over the years, with an estimated 4% growth in the economy in 2022. The growth has largely been driven by investment as well as private and public consumption. Despite the promising outlook, the country faces challenges from poverty and inequality, lack of jobs, and frequent natural disasters.

21. Equatorial Guinea

Debt to GDP ratio: 27.1

Equatorial Guinea, a Central African country, is an upper-middle country whose debt-to-GDP ratio stands at 27.1%. The country was in severe debt and consecutively faced recession for 7 years before experiencing a rebound in the year 2022. Owing to strong hydrocarbon revenues and favorable oil prices, the country’s overall economy has improved.

20. Botswana

Debt to GDP ratio: 26.1

Botswana is a county in Southern Africa with a debt-to-GDP ratio of 26.1%. The country has been experiencing robust growth in the past few years, primarily due to the diamond mining, and water and electricity sectors. In 2022, the economy expanded by 5.8%. Public debt, as of the year 2021, stood at 19% of GDP only as the country has been relying more on its reserves over the years.

19. Luxembourg

Debt to GDP ratio: 24.5

The European country of Luxembourg has a debt-to-GDP ratio of 24.6%. Despite being small, the country has a high income per capita and strong public and external balance sheets. It maintains a strong fiscal position while its financial assets exceed debt stock by a huge margin. Its GDP, as of the year 2021, was $85.51 billion. Projections for the year 2023 remain comparatively weaker due to tighter financial conditions, weak investment, and geopolitical uncertainty.

18. Kazakhstan

Debt to GDP ratio: 24.4

Kazakhstan recorded GDP growth of 3.2%, amounting to $224 billion. GDP growth in the year 2023-24 is forecasted to be led by the hydrocarbon sector stemming from a rise in oil production. External debt for the country as of January 2023 stood at $160.5 billion. The country has a low debt to GDP ratio due to its debt limit restriction set at 53.5% of gross domestic product.

17. Haiti

Debt to GDP ratio: 23.1

Haiti’s debt-to-GDP ratio stands at 23%. It is one of the poorest countries in the Western Hemisphere, with half of the population living below the poverty line. The country is engulfed in debt, foreign intervention, natural disasters, and political instability, being effectively collapsed. GDP in the country stood at $22 billion in 2022, while foreign debt levels stood at $1.25 billion, as per IMF.

16. Australia

Debt to GDP ratio: 22.3

Australia enjoys a low debt-to-GDP ratio owing to its prudent fiscal management policies and generally strong economic growth. However, IMF forecasts GDP growth to be slow in 2023 at 1.6%. The slow growth is largely due to higher interest rates that have been promulgated to battle inflation.

15. Palestine

Debt to GDP ratio: 21.3

Palestine’s public debt has been increasing primarily due to the Israeli-Palestinian conflict restricting investment, movement, and overall trade. This has hindered its economic development. Moreover, the country relies heavily on foreign aid for its public expenditures. Public debt, as of 2022, stood at $11,231 million, with GDP improving the same year largely from recoveries made in private sector consumption.

14. Kosovo

Debt to GDP ratio: 20.74

Despite the shocks coming from the pandemic, unfavorable weather conditions, Russia’s invasion of Ukraine, high energy and food prices, and overall uncertainties in the market, Kosovo is one of the countries whose GPD has surpassed pre-pandemic levels. Exports and private consumption are driving GDP growth in 2023. Even though the public debt is low, the economy is facing large trade deficits, and overall government expenditure is unfavorable.

13. Bulgaria

Debt to GDP ratio: 20.5

Bulgaria has one of the lowest levels of debt in the European Union. CEIC said the national government debt reached $21.1 billion in March 2023. Meanwhile, growth in GDP, as of 2023, is expected to slow down to 1.7% before a rebound the following year. Unlocks in EU funds will help drive the rebound.

12. Bosnia and Herzegovina

Debt to GDP ratio: 19.6

Bosnia and Herzegovina, a country in Southeastern Europe, experienced some contractions in its economy during the pandemic. However, it resumed growth in 2021 by 7.5%. Post 2021, strong growth is still being experienced due to manufacturing and demand-driven service sectors. Meanwhile, debt for the country reached $5 billion in 2022, while GDP stood at $53 billion.

11. Eswatini (Swaziland)

Debt to GDP ratio: 19.44

Swaziland, now known as Eswatini, has had debt levels equating to 38.4% of GDP in 2021. GDP growth has been slow at approximately 0.4% in 2022. The primary reasons for slow growth are weak agriculture sector performance, domestic demand pressures, and social and political uncertainty. The country also largely depends on South Africa for its exports and imports.

10. Estonia

Debt to GDP ratio: 18.4

Having one of the lowest debt levels in the European Union, Estonia’s debt accounts for 18.4% of GDP. The fall in debt levels can largely be attributed to GDP growth and support of fiscal policy in the country. Growth in the Estonian economy has been coming from real estate, information and communication, construction, storage activities, and transportation.

9. Russia

Debt to GDP ratio: 18.2

In order to keep itself insulated from global capital markets, Russia has had its debt levels kept to a bare minimum. Conservative foreign policies have helped the country achieve this goal. GDP, as of 2021, was valued at $1775.88 billion, with the oil and gas industry accounting for 15% of GDP. Meanwhile, external debt stood at $100.4 billion in early 2023.

8. Burundi

Debt to GDP ratio: 17.2

Due to continued recovery in agriculture and public investments, Burundi’s growth rate for 2023 is projected to be 4.6%. However, the country has been facing severe economic shocks in the past due to the pandemic and other macroeconomic imbalances. Increased import prices have further aggravated inflation, widened fiscal deficits, and also worsened current account pressures.

7. Congo

Debt to GDP ratio: 14.6

The Democratic Republic of Congo is a poor country, with almost 70% of the population living in extreme poverty. Its economy experienced a growth of 6.1%, primarily due to mining sector exports and investments. Despite a low debt-to-GDP ratio, it is classified as having debt distress due to its high arrears. Numerous political conflicts have taken place within the country throughout the years as well.

6. Azerbaijan

Debt to GDP ratio: 11.7

As of December 2021, external debt for Azerbaijan stood at $8.1 billion, while nominal GDP was reported to be $20.4 billion in September 2022. The country has a comfortable cushion against rising public debt due to adequate gross official reserves. This cushion is also complemented by foreign assets held by the State Oil Fund of Azerbaijan (SOFAZ), estimated to be $50 billion.

5. Turkmenistan

Debt to GDP ratio: 8

Turkmenistan lies in a strategic position between China, Russia, and Europe. The country holds the fourth-largest natural gas reserves in the world. It has healthy public accounts and an overall low level of debt. 2023 is expected to be a period of growth for the country. However, the country is highly dependent on hydrocarbons, accounting for 60% of exports in 2021.

4. Afghanistan

Debt to GDP ratio: 7.4

Afghanistan’s debt to GDP is deceptively low, although it is at a high risk of external debt distress. The country is facing not only a fragile security situation but also domestic revenue shortfalls, an uncertain political situation, and a rapid exchange rate depreciation. The country’s debt sustainability is largely dependent on a continuous inflow of donor grants against considerable fiscal and external deficits.

3. Kuwait

Debt to GDP ratio: 7.1

Kuwait has a large public sector with a generous welfare state. Expenditures on salaries, transfers, and subsidies are huge, which is why development and project spending remains restricted. The country holds an estimated 6% of the world’s oil reserves which account for more than half of its GDP. Slow external demand in 2023, coupled with oil production cuts, means growth will be slower. Therefore, GDP is expected to increase by 2.6%.

2. Hong Kong

Debt to GDP ratio: 3

IMF has reported that Hong Kong’s debt-to-GDP ratio stands at 3%, with GDP amounting to $368.14 billion as of 2021. Due to its prudent financial policy of not relying on deficit financing, it has managed to keep its debt levels low. The country holds substantial capital and liquidity buffers, and its overall financial sector is top-notch. Economic growth continues forward, with revenues coming in mainly from domestic economic activity and tourism services.

1. Brunei

Debt to GDP ratio: 1.9

Brunei is one of the rare few countries with virtually no external debt. It is a small and wealthy country which exports crude oil and natural gas. The revenues coming in from the petroleum sector roughly account for half of their total GDP. The country can largely fund its economy through lending by its own banks.

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Disclosure: none. 25 Countries with the Lowest Debt to GDP Ratios is originally published on Insider Monkey.