What it is
Sovereign debt is the total amount of money owed by a nation’s government to both local and foreign lenders. It's also called national debt or public debt.
A country may borrow money by issuing debt securities (like Treasury bills and bonds) or by taking out loans from other countries, financial institutions, and global organizations.
What it means for you
A government’s debt can affect you as an investor and citizen depending on how it is managed. On one hand, governments can spend the borrowed money to deliver better transport, education, and healthcare services, among others.
Public spending can also help create jobs and support economic growth. In turn, a healthy economy and manageable debt can boost a country’s attractiveness to both local and foreign investors.
On the flipside, if a government borrows too much, it might struggle to repay its debts and may end up raising taxes to meet obligations. At worst, high debt levels can lead to economic instability or even a default.
You can look into a government’s creditworthiness or ability to make repayments to know how sovereign debt might affect the economy and your investments.
