Generic selectors
Exact matches only
Search in title
Search in content
Post Type Selectors
Search Products
Filter by Categories
Company Secretarial
General Business
General Interest
Investing in Property
Personal Growth
Personal Wealth
Trusts and Estate Planning

Call me stupid, but I think that Debt to GDP is a meaningless measure of our ability to repay borrowings.

Why? Because it’s quite possible for a country to have a massive GDP and be unable to pay foreign debts and equally, a country could have a relatively small GDP and be able to comfortably repay them.

In order to understand this, we need to look at what GDP is. In a nutshell it’s total production of goods and services, including trade surplus or deficit.

So, let’s say that a country had a GDP (like South Africa) of $350bn a year but produced exactly everything that it’s population required. No more, no less. In other words, it is completely self sufficient. No exports and no imports. That is, no trade surplus or deficit. Then along comes Covid, and it has to borrow $200m to buy vaccines. This debt to GDP is  trivial .06%. But, can it ever repay that debt? Impossible.

Now let’s take another example. A country with a relatively low GDP, say, $5bn but producing lots of high value goods or services and exporting them, whilst only having to import low value goods and services. It has a trade surplus of $1bn a year. Then along comes Covid and it has to borrow $200m to buy vaccines. This debt to GDP is 4%. Can it repay that debt? No problem!

So what is relevant about Debt to GDP? Zip!

The only thing that counts surely, is debt to trade surplus, as trade surplus is the only source for the repayment of foreign debt.

And here’s the situation on South Africa –


Be scared!


XHTML: You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Looking for even more informative content? Check out the books I have written which have proved to be very popular.

Need help with your Trust or Business?

Contact us today or set up a free meeting with our CEO, Derek Springett. We have been offering expert advice and business services since 1971. You can also view see our full list of services.

Do you want to leave your cart?

Your cart is awaiting your next purchase, so please proceed to the Home page and continue shopping. If you are leaving your cart because of problems, why not give us a call on our 24 hr numbers 063 866 8928 or 011 805 0030 (subject to load shedding)? If all else fails, call Derek, our CEO on 082 552 9696. We’ll do what we can to help