When the agreed term of a bond ends – known as its maturity date - the government pays back the original sum of money. Some bonds are very short term, others last for decades. Buying government debt is normally a safe investment – if you are lending to a rich and stable country.
It is true that countries borrow money just like companies and must repay them in a similar fashion. If a company fails to repay the debt, it must face the consequences of its action. However, when a nation defaults on its debt, the entire economy takes a hit.
Today, a government that defaults may be widely excluded from further credit; some of its overseas assets may be seized; and it may face political pressure from its own domestic bondholders to pay back its debt. Therefore, governments rarely default on the entire value of their debt.
However, President Andrew Jackson shrank that debt to zero in 1835. It was the only time in U.S. history when the country was free of debt.
Japan, with its population of 127,185,332, has the highest national debt in the world at 234.18% of its GDP, followed by Greece at 181.78%.
China is facing a full-blown debt crisis with $8 trillion at risk as Xi Jinping eyes an unprecedented 3rd term.
Current debt
As of January 2023, Public Debt of Pakistan is around PKR 62.46 trillion (USD 274 billion) which is nearly 79 percent of gross domestic product (GDP) of Pakistan.
As early as July 1998, Pakistan's Government made a policy decision to enter technical default with some official creditors by delaying payments and accumulating arrears. By late November 1998, official foreign exchange reserves had fallen to $400 million.
Technically, nothing happens to your debt when you leave the country. It's still your debt, and your creditors and collectors will continue trying to get you to pay it back.
The countries with the highest level of household debt based on OECD data are: Norway in first place, followed by Denmark and the Netherlands.
The MDRI allows for 100 percent relief on eligible debts by three multilateral institutions—the IMF, the World Bank, and the African Development Fund (AfDF)—for countries completing the HIPC Initiative process.
The country's net economic power would increase as more money was spent on goods and non-financial services—production rather than monetary intermediaries. We would be back to being able to consume what our country's economic capacity could produce.
The most immediate impact of sovereign default is that borrowing cost rises for the government in the domestic and international bond market. The higher interest will impact the entire economy of the country, including the value of currency, banking system, stock market, corporate borrowing, etc.
Global debt is borrowing by governments, businesses and people, and it's at dangerously high levels. In 2021, global debt reached a record $303 trillion, according to the Institute of International Finance, a global financial industry association.
Poverty rose sharply in the rural areas in the 1990s and the gap in income between urban and rural areas of the country became more significant. This trend has been attributed to a disproportionate impact of economic events in the rural and urban areas.
Right now, analysts are predicting that Pakistan urgently needs $28 billion in order to meet its financing needs. The only hope to be able to accumulate money is to obtain another loan from the IMF! If Pakistan is not able to arrange a loan, it is heading for bankruptcy.
Pakistan's economy was quickly revitalized under Ayub Khan, with economic growth averaging 5.82 percent during his eleven years in office from 27 October 1958 to 25 March 1969. Manufacturing growth in Pakistan during this time was 8.51 percent, far outpacing any other time in Pakistani history.
At present, Pakistan is on the verge of economic collapse. Its hopes are pinned on getting concessions from the International Monetary Fund (IMF) on the Extended Fund Facility established in 2019. Islamabad further expects to get economic help from friendly nations in the form of donations and long-term loans.
Public Debt
The public holds over $24.29 trillion of the national debt. 1 Foreign governments hold a large portion of the public debt, while the rest is owned by U.S. banks and investors, the Federal Reserve, state and local governments, mutual funds, pensions funds, insurance companies, and holders of savings bonds.
U.S. debt to China comes in the form of U.S. Treasuries, largely due to their safety and stability. Although there are worries about China selling off U.S. debt, which would hamper economic growth, doing so in large amounts poses risks for China as well, making it unlikely to happen.