Definition of net debt per capita


What is net debt per capita?

Net debt per capita is a measure of the value of a government’s debt expressed in terms of the amount attributable to each citizen under the jurisdiction of the government.

Key points to remember

  • Net debt per capita is simply the total debt of a country or other jurisdiction divided by the population who live there.
  • Net debt per capita can give an indication of the indebtedness of the government in question.
  • Net debt per capita is often used to make a political statement on current fiscal policy rather than as a true economic indicator.

Understanding Net Debt Per Capita

Simply put, net debt per capita is the amount of debt a government has per citizen. This is often calculated at the national level, but it also applies to state and even municipal government levels. The level of net debt per capita can be an important factor to consider when analyzing a government’s ability to continue to pay debt servicing costs through its current levels of tax revenue. In other words, net debt per capita can be used to help assess the risk of government bond default and give an indication of overall economic health.

Net debt per capita is a relatively straightforward calculation to make. The formula is:

Net debt per capita = (Short-term debt + Long-term debt – Cash and cash equivalents) / Population

For example, if a country of 300 million people has a total debt of $ 950 billion and liquidity of $ 20 billion, its net debt per capita is:

Net Debt Per Capita = ($ 950 billion – $ 20 billion) / $ 300 million = $ 3,100

Technically, this means that every taxpayer owes the country $ 3,100 if the country pays off its national debt. This assumes, of course, that every citizen has become responsible for the country’s outstanding debt, which does not happen in practice. In this sense, net debt per capita is simply an indicator by which to measure a country rather than an actual approximation of actual individual responsibility. More importantly, per capita net debt figures can usually be obtained without having to collate the data and perform the calculations, as many public sources and economic think tanks publish these figures.

Size of net debt per capita

Net debt per capita is more commonly used for political statements than it is as an economic indicator per se. Expressing the national debt in terms of citizens’ share makes a figure that is often too high to be understood as a whole much more real for citizens. In a sense, the responsibility of each taxpayer, present and future, increases as the national debt increases.

In 2019, for example, the US net debt per capita was around $ 69,060, almost double what the average US taxpayer who reported as a single adult earned all year. Other countries with high net debt per capita are Japan, Ireland, Italy, Belgium, Austria, France, Greece, UK and Portugal.

Again, these numbers are typically used in domestic politics to push for certain changes in fiscal policy. That said, net debt per capita can be compared to GDP per capita to compare several regions of the world to determine the most promising area in which to invest internationally. However, the debt to GDP ratio is more commonly used for this purpose because it simplifies two sets of data into a single line plotted for each country. This greatly facilitates viewing and comparison.

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