# Net Debt Per Capita Defined

## What is net debt per capita?

Net debt per capita is a measure of the value of a government’s debt expressed in terms of the amount attributable to each citizen under the jurisdiction of the government. It is usually calculated using the following formula:

Net debt per capita = (short-term debt + long-term debt – cash and cash equivalents) / population

### Key points to remember

• Net debt per capita is simply the total debt of a country or other jurisdiction divided by the population living there.
• Per capita net debt can give some idea of ​​the leverage of the government in question.
• Per capita net debt is often used to make a political statement on current fiscal policy rather than as a true economic indicator. The debt-to-GDP ratio and other parameters often provide a more complete picture of a country’s real economic health.

## Understanding net debt per capita

Simply put, per capita net debt is the amount of government debt per citizen. This is often calculated at the national level, but it also applies at the state and even municipal government levels. The level of net debt per capita can be an important factor to consider when analyzing a government’s ability to continue paying its debt service costs through its current levels of tax revenue. In other words, per capita net debt can be used to help assess the risk of default on government bonds and to give an indication of the overall economic health.

## Calculation of net debt per capita

Net debt per capita is a relatively simple calculation. For example, if a country of 300 million people has total debt of \$ 950 billion and cash of \$ 20 billion, its net debt per capita is:

Net debt per capita = (\$ 950 billion – \$ 20 billion) / 300 million = \$ 3,100

Technically, this means that every taxpayer would owe the country \$ 3,100 if he had to pay off his national debt. This supposes, of course, that each citizen has become responsible for the outstanding debt of the country, which does not happen in practice. In this sense, net debt per capita is simply an indicator for measuring a country rather than a real approximation of real individual liabilities. More importantly, per capita net debt figures can usually be obtained without having to collect inputs and make calculations, as many public sources and economic think tanks publish these figures.

## Size of net debt per capita

Net debt per capita is more commonly used for political reporting than as an economic indicator per se. Expressing the national debt in terms of the share of the citizen makes a figure often too large to be understood as a whole much more real for people. In a sense, the responsibility of every taxpayer, present and future, increases as the national debt increases.

In 2020, for example, the U.S. per capita net debt was \$ 61,539, almost double what the average U.S. taxpayer who deposited as a single adult has done all this year. The other countries with high net debt per capita are Japan, Ireland, Italy, Belgium, Austria, France, Greece, the United Kingdom and Portugal.

Again, these numbers are generally used in domestic policy to push for some changes in fiscal policy. That said, net debt per capita can be compared to GDP per capita to compare multiple regions of the world to determine the most promising area for investing in the world. However, the debt-to-GDP ratio is more commonly used for this purpose because it simplifies two sets of data in one line drawn for each country. This makes viewing and comparing much easier.