National Debt Explained
What government debt is, who holds it, and when it matters.
By Iris Penhaligon | Oct 19, 2026 | 6 min
National debt is the total amount a government owes.
It grows when governments run deficits.
I Who holds it
- — Domestic pension funds and banks
- — Central banks
- — Foreign investors
- — Individuals
II Debt to GDP
Debt is often compared to GDP to judge sustainability.
III Interest costs
Rising interest rates increase the cost of servicing debt.
IV See also
Our fiscal policy guide.
V Why governments borrow
Governments borrow to fund investment, such as infrastructure, and to support the economy in downturns, when tax revenues fall and spending on benefits rises. Borrowing also spreads the cost of big shocks, like wars or pandemics, across generations. Problems arise if debt grows faster than the economy for long periods, if interest rates rise sharply, or if investors lose confidence.
Countries that borrow in their own currency and have credible institutions usually have more room to borrow than those that borrow in foreign currencies.
This is general educational information about economics, not financial, investment, or tax advice. Consult a qualified, licensed professional before making financial decisions.
Further reading
- 1. Supply Chains: Why Disruptions Ripple Through the Economy
- 2. What Do Central Banks Actually Do?
- 3. What Causes Inflation? A Plain-English Guide