LEAGUE TABLE: EXTERNAL DEBT AS PERCENTAGE OF GNP How to measure the levels of debt that can be sustained is intensely debated. Some argue that many definitions of what constitutes 'sustainable debt' put the thresholds so high that unacceptable sacrifices of basic social services, with great human costs, have to be made so that debt service can be paid. This league table of external debt-to-GNP ratios does not include such economic or social sustainability factors, but it does provide a useful perspective for examining and comparing countries' debt levels. Gauging debt's burden Borrowing is essential for financing development and is a fundamental aspect of the global economic system. Ideally, a country borrows to boost long-term productivity and economic output and to advance in human development, with gains from economic growth and exports going to further stimulate the economy and repay lenders the principal and interest owed. However, when a country's debt becomes disproportionately large compared to its gross national product (GNP) and export earnings, then instead of stimulating growth and helping to advance human development, debt begins to sap economic vitality and drain resources from social sectors. To repay such high levels of debt (so as not to default or add arrears to the total debt), a country must divert already scarce resources. Too often the poor, especially children, pay the highest price, deprived of basic health care, nutrition and education because a significant proportion of government resources goes to servicing debt. The table lists countries by region in order of the magnitude of their debt burden — calculated as the ratio of total external or foreign debt to GNP. The most debt-distressed countries top the regional lists. But their debt burdens are not equal. Guinea-Bissau, where debt is 366% of its GNP, has a far greater burden than Turkmenistan, where debt is 63% of GNP. Averages often mask serious disparities. In sub-Saharan Africa, the most seriously affected region, the average is 69%. But this average includes South Africa, where the GNP is more than 40% of the combined GNP of the entire region and where the external debt-to-GNP ratio is low. As the chart at the bottom of this page shows, when South African data is excluded, the region's ratio jumps to 108%. The external debt-to-GNP ratio is only one measure used to gauge debt. The ratio of debt service to exports also determines whether poor countries' debts are 'sustainable', as do the terms on which debt is incurred. Guinea-Bissau, for example, borrowed nearly three quarters of its debt on concessional terms (at low interest rates for long terms, with repayment deferred), while Turkmenistan borrowed less than 5% on such terms. But Guinea-Bissau's very high debt-to-GNP ratio nonetheless indicates severe economic and social stress.
Total external debt as a percentage of gross national product (GNP)
* Central government external debt only.
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