A country’s “debt” — often called national debt, public debt or sovereign debt — is the total amount of money that its government has borrowed and not yet repaid. This borrowing is not just for one year, but accumulates over many years: whatever the government has borrowed over time (to cover deficits when spending exceeded revenues) and hasn’t yet paid back — that becomes part of its debt.

Why do governments borrow?

When a government spends more money than it collects through taxes, fees, and other revenues — for example on public services, infrastructure, pensions, defense, social programs — it has a “budget deficit.” To cover this gap without immediately raising taxes or cutting spending, governments borrow money by issuing debt instruments (like bonds).

Borrowing allows governments to smooth out spending over time, invest in long-term projects (roads, schools, health), and respond to unexpected expenses (recessions, emergencies). But borrowing also creates obligations: not only must the principal be repaid eventually, the government must also pay interest.

What counts as part of national debt?

Debt is typically divided into two broad categories:

• Internal (domestic) debt: Money owed to lenders inside the country (citizens, banks, local institutions).
• External (foreign) debt: Money owed to lenders outside the country, which can include foreign governments, international institutions, foreign banks or investors.
• In practice, many governments — especially large ones — raise debt by issuing government bonds or securities. Institutional investors, banks, pension funds, and individuals (both domestic and foreign) can purchase these securities as an investment.

Who “owns” the debt?

When you hear a country “owes” a certain amount, that debt is distributed among many types of creditors. For example, looking at the United States Department of the Treasury debt (as a case), the holders include:

• Domestic institutions and individuals: banks, insurance companies, mutual funds, pension funds, state or local governments.
• Domestic government accounts: various branches or programs of the government itself can hold debt (for instance, pension or social security trust funds reinvest surpluses into government securities).
• Foreign holders: foreign governments, foreign central banks, foreign investors, or financial institutions outside the country.

For instance, as of late 2023 the foreign portion of U.S. publicly held debt was roughly 29–30%. Large foreign creditors have included countries such as Japan and China, as well as the United Kingdom.

Debt vs. Deficit: What’s the difference?

It’s important to distinguish between a country’s deficit and its debt:

• Deficit: The amount by which government spending exceeds revenue in a single year. If a government spends more than it collects, that gap is the deficit for that year.
• Debt: The total accumulation of past deficits (minus any repayments). In other words, debt is the sum of all borrowing the government still owes.

Even if a government runs a surplus one year (taking in more than it spends), the overall debt doesn’t automatically disappear — it only reduces if the government uses some of the surplus to repay borrowed money.

What high national debt can mean — and when it’s risky

Having debt isn’t inherently bad. Borrowing helps governments invest in long-term growth, handle emergencies, or support citizens.

But if debt becomes very large relative to the size of the economy, it can pose risks. Economists often compare a country’s debt to its GDP (gross domestic product) using a “debt-to-GDP ratio.” This ratio helps gauge whether the country’s economy is big enough to sustain the debt — that is, to pay interest and repay principal without excessive burden.

If a country’s economy is shrinking, or growth is slow, servicing large debt becomes harder. High interest costs may consume a big portion of government budgets, potentially forcing cuts to public services or heavier borrowing.

Also, heavy reliance on foreign creditors or foreign investors can reduce a government’s flexibility — if foreign investors demand higher yields for risk, or if foreign governments choose to reduce holdings, it can raise borrowing costs.

In summary

National debt is simply the cumulative total of money a government has borrowed and not yet repaid. Governments borrow when expenditures — on social programs, infrastructure, defense, etc. — exceed revenues. The debt is held by a wide set of creditors: domestic individuals and institutions, domestic government programs, and foreign entities.

Having debt is a normal tool in public finance. What matters is how the borrowed money is used — whether for investments that foster growth, or for recurring spending that doesn’t boost productivity — and whether a country’s economy is healthy enough to sustain repayment without harming public finances.

Top 15 countries by government debt (2025)