Net Debt Per Capita

The net debt per capita is a measurement of the value of a government's debt expressed in terms of the amount attributable to each citizen under the government's jurisdiction. It is commonly computed using the following formula:

Net Debt Per Capita = (Short-Term Debt + Long-Term Debt - Cash & Cash Equivalents) / Population

In simple terms, the net debt per capita is how much debt a government has per citizen. The level of net debt per capita is an important factor to consider when analyzing a government's ability to continue to pay its debt service costs through its current levels of tax revenue. In other words, this measure helps indicate the default risk of government bonds.

For example, if a country with a population of 300 million people has a total debt of $950 billion and cash of $20 billion, its net debt per capita is:

= ($950 billion - $20 billion) / 300 million

= $930 billion / 300 million

= $3,100

Technically, this means that each taxpayer would owe the country $3,100 if the country was to pay off its national debt --- assuming of course that every citizen became liable for the outstanding debt of the country. As the debt continues higher, the liability of every taxpayer also rises. In 2016, the net debt per capita of the United States was $61,539, almost twice what the average American taxpayer who files as a single adult makes in an entire year. Other countries with the highest net debt per capita include Japan, Ireland, Italy, Belgium, Austria, France, Greece, the United Kingdom, and Portugal.

The net debt per capita measures the ability of a government to pay its debt if it came due today. The metric helps analysts and investors understand whether a country is over-leveraged or under-leveraged, that is, whether a country can "afford" its debt, whether it needs to raise its tax revenue, or whether it might default. Rating companies also use this measure to rate a country’s sovereign debt in terms of how high a credit risk the government’s debt poses. The net debt per capita metric makes comparing the debt loads of different countries with each other fair.