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Economic Viewpoint

Snapshot of External Debt in Emerging and Developing Countries

December 5, 2017
François Dupuis, Vice-President and Chief Economist • Hendrix Vachon, Senior Economist

External debt is the total amount of all debt owed to foreign lenders. It does not solely refer to the debts contracted by governments, it also encompasses household debt and business debt. A high level of external debt can become a source of financial and economic instability, especially in emerging and developing countries. The consequences in the event of a default can affect several countries. This Economic Viewpoint draws a portrait of external debt in low- and middle-income countries, based on the World Bank nomenclature. Since 2014, external debt in these countries has stabilized on average, but risk factors remain.