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Concept
Government debt
Summary
A country's gross government debt (also called public debt, or sovereign debt) is the financial liabilities of the government sector. Changes in government debt over time reflect primarily borrowing due to past government deficits. A deficit occurs when a government's expenditures exceed revenues.
Government debt may be owed to domestic residents, as well as to foreign residents. If owed to foreign residents, that quantity is included in the country's external debt.
In 2020, the value of government debt worldwide was $87.4 US trillion, or 99% measured as a share of gross domestic product (GDP). Government debt accounted for almost 40% of all debt (which includes corporate and household debt), the highest share since the 1960s. The rise in government debt since 2007 is largely attributable to the global financial crisis of 2007–2008, and the COVID-19 pandemic.
The ability of government to issue debt has been central to state formation and to state building. Public debt has been linked to the rise of democracy, private financial markets, and modern economic growth.
Government debt is typically measured as the gross debt of the general government sector that is in the form of liabilities that are debt instruments. A debt instrument is a financial claim that requires payment of interest and/or principal by the debtor to the creditor in the future. Examples include debt securities (such as bonds and bills), loans, and government employee pension obligations.
International comparisons usually focus on general government debt because the level of government responsible for programs (for example, health care) differs across countries and the general government comprises central, state, provincial, regional, local governments, and social security funds. The debt of public corporations (such as post offices that provide goods or services on a market basis) is not included in general government debt, following the International Monetary Fund's Government Finance Statistics Manual 2014 (GFSM), which describes recommended methodologies for compiling debt statistics to ensure international comparability.
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