Why are almost all countries in debt? Then there are developed countries. Where are the debts?

    Hello everyone, see you soon. Welcome to our article on money. In this article, I would like to talk about the national debt. The national debt itself includes public and private debt. This time we will talk specifically about a country's external debt to other countries to international organizations, or what is called external debt in economic terms. So before discussing this, I would like to state a disclaimer first. I really understand that sovereign debt issues are very delicate to discuss. No need to blame political parties or political interests. This article was created exclusively by In any case, for educational purposes based on existing data and facts.

Why are almost all countries in debt? Then there are developed countries. Where are the debts?

    Furthermore, the context of sovereign debt discussed here is not limited to the Indonesian state but applies globally. Did you know that over 90% of countries in the world are in debt? Including the most economically advanced countries such as USA, China, Japan, UK, Germany and Canada. All have external debts. In fact, the developed countries mentioned earlier are among the most indebted countries in the world. Are there any countries with no debt at all? Yes, but the quantity is small. for example: Brunei, Vatican, Andorra and several other small or independent territories.

    The question is why are most of these countries in debt? So if all developed countries are in debt, who is in debt? should explain the difference between As a society, when we are stuck and have no money, we usually owe it. Either because of online loans, or because of restaurants or Warteg. This is why debt is usually perceived as such in a common society like ours. negative things. At the national level, perspectives differ.

    Debt doesn't mean poor country or shameful deeds. Countries with advanced and prosperous economies actually have very high levels of debt compared to other countries. So, first of all, we need to understand that country-level debt is not necessarily the result of a country being poor or being unable to be productive. In fact, country-level debt can be used to accelerate or facilitate a country's progress.

    If there is a metric, it should use the debt ratio in a sound and sensible way, or the allocation of funds should also be transparent. What does "accountable" mean? This means that this debt will be used to develop a sector of production that can bring money to the country in the future while benefiting society.

    It is practiced in many countries around the world, so it is not limited to Indonesia, but also includes developed and developing countries in various regions of the world. Now you may be interested. How do you measure a country's debt, is it still sound and reasonable? Well, a common gauge is the ratio of debt to GDP, or Gross Domestic Product (GDP).

    In other words, it compares debt levels to the country's overall productivity. The calculation method is to divide the annual debt amount by GDP and multiply by 100%. Some might say that this debt-to-GDP ratio may reflect a country's capacity or ability to pay its debts. Thailand for example. In 2017, Thailand's public debt to GDP ratio was 33%. This means that Thailand owes her 33% of the country's manufacturing capacity in one year. For example, the total revenue for one year is 100 million rupiah. So your debt is Rp 33 million. This ratio tells us how high a country's debt is relative to its respective country's performance. Which countries have high debt ratios?

    For example, the Netherlands, 522% Singapore, 453% UK, 313% Germany, 145% USA, 115%. Others What are some examples of countries with low debt ratios? For example, only 3% in Nigeria, 15% in China and 19% in India. But what about Indonesia itself? How is your relationship? In May 2020, Indonesia's debt ratio was 34.5 percent of GDP. I hope you have a better understanding of how to measure whether a country's debt is still reasonable or is already too high.

    So don't be surprised to hear that the national debt has already reached trillions of dollars. When we are called by a nominal name, we get the impression that our debts are really big in the eyes of mere ordinary people. The state of the debt ratio, as well as other indicators such as the primary balance of the national budget, should continue to be considered. Oh yeah, in Indonesia itself, this debt ratio is regulated by Finance Law No. 17 of 2003. It states that the maximum allowed debt ratio is 60% of GDP.

    Now let's discuss the next question. For example, if almost all countries, including developed countries, are in debt, who is in debt? Therefore, it may be domestic or foreign that the country has been indebted. If a domestic state can owe its own citizens by selling securities or bonds to the public, companies or commercial banks in the financial markets, or governments can also sell government bonds to the central bank. This is commonly known as quantitative easing policy.

    Here, these securities or bonds are purchased by other countries, foreign companies, central banks, or commercial banks of other countries. Additionally, external credit sources can be obtained from international financial institutions such as the IMF, World Bank, European Investment Bank, and Islamic Development Bank. This international financial institution is therefore an institution established by one or more countries that adheres to international law. The birth of the institution began with the 1944 Bretton Woods Accords.

    At the time, the purpose of establishing this financial institution was the recovery of the world economy after World War II. Oh yeah, usually different international financial institutions have different roles. The IMF, for example, is focused on maintaining stability in global currency values. On the other hand, the World Bank plays a role as a source of development finance for developing countries. This financial institution can also be classified as a bilateral or multilateral bank. Bilateral banks are created by countries for the purpose of providing loans to developing or emerging countries in general. Multilateral banks, on the other hand, were developed by a group of countries to provide credit to their member countries and other countries. If you grew up here, you may be wondering where this financial institution came from.

    Why do we have so much money that we owe so many countries? International Financial Institutions Contributed by Member States In general, developed countries are the largest contributors. For example, the Islamic Development Bank has 57 members, with Indonesia being the largest shareholder and a very large shareholder of 2.25%, with US$1.1 billion. On the other hand, these financial institutions are also funded by repayment and interest on government debt. It is a very large cooperative, up to the national scale. Well, that's one explanation for the national debt. I hope you found this article useful. If you have any other questions, write your question in the comments section. Be sure to invest in subscribing to this article.

    The best content from us. See you in the next article. There is no end to talking about money, so stay tuned for articles that talk about money! 

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