World’s 10 major countries under debt cloud

Business

oi-Monika Nihalani

By Monika Nihalani And Shoaib Zaman

Published: Wednesday, August 3, 2011, 12:33 [IST]

While the United States external debt is indeed the largest in the world, a broader context shows that other countries around the world face even more dire debt situations.

Comparing gross external debt to GDP is one of the useful measures to know about the country's debt position, a lower ratio is generally seen as more favorable, as it shows that a country is producing enough to to repay its debts.

(To know, what is Debt-to-GDP ratio, click here)

For example, US external debt is over $14.3 trillion (95% of GDP). The country with the highest external debt is Luxembourg; their external debt is 3,443% of GDP. This sounds terrifying but this doesn't mean Luxembourg is on the brink of bankruptcy.

It just reflects the fact their economy is based on international banking. This ratio is just a mere parameter to know debt situations of different countries and also government only contributes a small fraction to the gross external debt.

But since the indebtedness is so huge, it is not easy for these countries to show any sign of improvement very quickly. In the times to come, these countries are expected to face harsh situations to come out of the vicious circle.

From the list of world's 50 largest economies to compare which ones have the highest external debt, we have listed top ten here (Data have been taken from CIA Factbook):