Government debt

Public finance
Policies Agricultural Economic Energy Industrial Investment Social Trade Fiscal Monetary Policy mix
Fiscal policy Budget policy Debt internal Deficit / surplus Finance ministry Fiscal union Revenue Spending deficit Tax
Monetary policy Bank reserves requirements Discount window Gold reserves Interest rate Monetary authority central bank currency board Monetary base Monetary (currency) union Money supply
Trade policy Balance of trade Free trade Gains from trade Non-tariff barrier Protectionism Tariff Trade bloc Trade creation Trade diversion Trade / commerce ministry
Revenue Spending Non-tax revenue Tax revenue Discretionary spending Mandatory spending
Optimum Balanced budget Economic growth Price stability
Reform Fiscal adjustment Monetary reform
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A country's gross government debt (also called public debt or sovereign debt^[1]) is the financial liabilities of the government sector.^[2]: 81 Changes in government debt over time reflect primarily borrowing due to past government deficits.^[3] A deficit occurs when a government's expenditures exceed revenues.^{[4][2]: 79–82} 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.^[5]

In 2020, the value of government debt worldwide was $87.4 US trillion, or 99% measured as a share of gross domestic product (GDP).^[6] Government debt accounted for almost 40% of all debt (which includes corporate and household debt), the highest share since the 1960s.^[6] The rise in government debt since 2007 is largely attributable to stimulus measures during the Great Recession, and the COVID-19 recession.^[6]

Governments may take on debt when the government's spending desires do not match government revenue flows. Taking debt can allow governments to conduct fiscal policy more effectively, avoid tax increases, and making investments with long-term returns.^[7] The ability of government to issue debt has been central to state formation and to state building.^[8][9] Public debt has been linked to the rise of democracy, private financial markets, and modern economic growth.^[8][9]

Actors that issue sovereign credit include private investors, commercial banks, multilateral development banks (such as the World Bank) and other governments.^[7] Low-income, highly indebted states tend to attain loans from multilateral development banks and other governments because they are considered too risky for private investors.^[7] Higher-income states tend to issue sovereign bonds, which are subsequently traded by investors in secondary markets.^[7] Ratings agencies (e.g. Moody’s, Standard & Poor’s) issue ratings that measure the credit-worthiness of governments, which may in turn affect the value of sovereign bonds in secondary markets.^[7]