Of course this ranking is completely arbitrary on my part. However, if your net debt to GDP ratio is over 100 percent, it means that it would take an entire year or more of your national output to pay off the debt. I will assume that is equivalent to fiscal death. As Figure 1 shows, the IMF numbers would put seven countries on the fiscal dead list with Greece at the top (a net debt to GDP ratio of 156%) and Ireland at the bottom (with a net debt to GDP ratio of just over 100%).
If a country’s net debt to GDP ratio is between 50 and 100 percent, I have placed them in the next category. They are not quite fiscally dead as they can move around but their room to manouver is limited - they are the walking dead – a fiscal zombie. Especially for the ones approaching a debt to GDP ratio of 100 percent, they are in pretty tough shape given that they would have to devote much more than half their national output to pay off their debt. Figure 2 shows they range from Cape Verde (with a net debt to GDP ratio of 97%) to Mauritius (with a net debt to GDP ratio of just over 50%). Note that my list of fiscal zombies includes the USA, France, the UK and even Germany. However, being a fiscal zombie is a bit of a continuum with Germany (net debt to GDP ratio under 60%) far less of a zombie than say France, Belgium or the United States (debt to GDP ratios over 80%).
Finally, I term the fiscal living as those countries with net debt to GDP ratios below 50 percent – so less than half of their national output in a given year is required to pay off the debt. The tail end includes a sub-group I will term the fiscally anointed – countries with negative net debt to GDP ratios according to the IMF numbers. Resource wealth is an obvious reason for being fiscally anointed – for example Norway or Saudi Arabia. Some of the others I’m not so sure – does Sweden have oil wealth too? I’m certain someone will fill me in. In any event, Vietnam is at the top of this list with a net debt to GDP ratio of 49 percent while Belarus and Sierra Leone come out at 0 and the remaining are the fiscally anointed.
Interestingly enough, there may be biblical overtones in these numbers. There are seven fiscal zombies (seven deadly debt sinners?) and there are twelve fiscally anointed countries (apostles of fiscal rectitude?) The Canadian Federal Ministry of Finance will be reassured
to know that Canada is among the fiscal living and the Federal government will take
it as yet more evidence that Canada’s Economic Action Plan is working but I
digress. However, the fiscal living
is the largest of the three groups suggesting that there is hope yet for a troubled
world. Whether by good policy or outrageous fortune, a rather large number of countries have managed to keep their net debt to GDP ratios below 50 percent.
Of course, it will be pointed out that a net debt to GDP ratios over 100 percent (or as high as 156 or 134 percent) is not really fiscal death given that historically, some countries have had much higher ratios and still managed to get by. For example, think of Britain at the end of the Napoleonic Wars or Canada at the end of World War Two. Yet, what comes to mind is the following. Both of those examples are the end result of a period of major warfare – one to defeat Napoleon and the other to defeat Hitler. What exactly does Greece have to show for its debt to GDP ratio of 156 percent?