A country's debts: who are the creditors?

Question

In the news we always hear that countries have a deficit and that they have to borrow money.

But who gives the money? Who makes money with interest?

Thanks for the fast answers.

In the case of GERMANY, does any of you know any details? How much do the germans owe private persons, banks, other institutions?

Answer 1

Other countries; financial institutions, international monetary funds (IMF/world bank, Asian development banks, etc..), and individual. Countries raise funds through their direct borrowing from IMF and world bank to finance their current accounts and support their development programme on infrastructures, social development programme, even for military spendings. They also issue bonds which could be subscribed by financial institutions, banks, high networth individuals, private funds, mutual funds and so on..

Answer 2

Govt deficits accrue from annual budget - in under-developed countries, like Kenya where I live, the expenditure over-rides revenue,and Govt implements strategies to bridge the gaps e.g. through increase in tax bases, introduction of new taxes, increase in tax rates - under this approach, no creditors accrue.

The Govt also opts for domestic and foreign financing/borrowing - domestic entails sourcing from within the country e.g. playing around with the interest rates mainly through treasury bills - in some countries like Zaire - we understand the late President used to loan the country from his own pocket!!!..... Foreign lendings and borrowings from period accrued from World Bank, IMF, NGOs, other states e.g. USA, Britain....etc Currently, foreign financing in Africa is taking interesting dimension, as most countries are turning to China rather than US-backed institutions - due to "strings" attached to the loans.

Hope above profile will assist you derive the varied creditors to the Governments.

Answer 3

Foreign investors (thus the money from the financial account will flow to the current account); or the Central Bank in that country borrows from the IMF (Int. Monetary Fund) or IBRD (Int. Bank for Reconstruction and Development also known as "The World Bank").

Answer 4

The creditors are generally the private sector (in terms of short-term debt, aka current liabilties, usually come to terms within 30 days) and purchasers of bonds (which becomes long-term debt).

Germany's pension liabilities are financed through long-term debts in the form of national bonds. This is dangerous practice: you are using long-term debt to finance another long-term debt.

Answer 5

Say a country sells "government bonds", then whoever buys those bonds are the creditors to that country. It could be an individual person or another goverment.

Answer 6

good question. It seems like we are all indebted to each other. I believe Germany still owes us money from WWII and we owe money to other countries.

Answer 7

Currently China & Japan hold the notes for a large part of our (US) deficit.

Answer 8

i read that the creditor countries are japan germany and saudi arabia