<p>It is good statistics for the level of debt country has.</p>
<p>What you describe is not level of debt. A country does not have higher <em>level</em> of debt just because debt has shorter maturity. Moreover, interest rate country pays is completely inconsequential for the <em>level</em> of debt.</p>
<p>What you probably mean is not <em>level</em> of debt, but <em>sustainability</em> of debt. For the sustainability of debt maturity and interest rate payments would actually matter. However, debt-to-GDP is not measure of debt sustainability so there is no reason to take these into account for the variable.</p>
<blockquote>
<p>I am correct that it is not a good statistics for this purpose?</p>
</blockquote>
<p>No debt-to-GDP is accurate measure of debt <em>level</em> country has given the size of its economy. It is not a measure of debt sustainability, so one can't claim that having high debt-to-GDP, <em>necessarily</em>, is not sustainable for a country. However, if you just want to measure level of debt it is quite good measure.</p>
<blockquote>
<p>Wouldn't an actualized value (by a rate common to the countries be compared) of future payments be a better statistic?</p>
</blockquote>
<p>Not if your intention is to measure actual debt level of a country. This would measure the discounted present value of the debt of the country, which might be useful for various purposes, but it is not a measure of debt level. Also, it would make sense to use the same rate for every country since discount rate will be almost certainly heterogenous for different countries.</p>

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2022-09-16T18:53:14.180Z
2022-09-16T18:53:14.180Z
1muflon1
<p>The Debt to GDP ratio is a very popular statics to show the level of indebtedness of a government, so much that is even used in the <a href="https://en.wikipedia.org/wiki/Euro_convergence_criteria" rel="nofollow noreferrer">Euro convergence criteria</a>.
However its use seems misleading to me, since it does not account for interest rate or maturity.<br>
I am correct that it is not a good statistics for this purpose? <br>
If yes, why is so popular?<br>
Wouldn't an actualized value (by a rate common to the countries be compared) of future payments be a better statistic?</p>

<statistics><government-debt>
Is debt to GDP ratio a misleading statistic to show the level of indebtedness of a government?
pinpon
# Is debt to GDP ratio a misleading statistic to show the level of indebtedness of a government?

(Asked by: username_0 on 2022-09-16)

The Debt to GDP ratio is a very popular statics to show the level of indebtedness of a government, so much that is even used in the [Euro convergence criteria](https://en.wikipedia.org/wiki/Euro_convergence_criteria).
However its use seems misleading to me, since it does not account for interest rate or maturity.  
I am correct that it is not a good statistics for this purpose?   
If yes, why is so popular?  
Wouldn't an actualized value (by a rate common to the countries be compared) of future payments be a better statistic?

**Tags:** statistics, government-debt

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## 1 answers

### Answer by username_1 on 2022-09-16. Score: 1

It is good statistics for the level of debt country has.

What you describe is not level of debt. A country does not have higher *level* of debt just because debt has shorter maturity. Moreover, interest rate country pays is completely inconsequential for the *level* of debt.

What you probably mean is not *level* of debt, but *sustainability* of debt. For the sustainability of debt maturity and interest rate payments would actually matter. However, debt-to-GDP is not measure of debt sustainability so there is no reason to take these into account for the variable.

> I am correct that it is not a good statistics for this purpose?

No debt-to-GDP is accurate measure of debt *level* country has given the size of its economy. It is not a measure of debt sustainability, so one can't claim that having high debt-to-GDP, *necessarily*, is not sustainable for a country. However, if you just want to measure level of debt it is quite good measure.

> Wouldn't an actualized value (by a rate common to the countries be compared) of future payments be a better statistic?

Not if your intention is to measure actual debt level of a country. This would measure the discounted present value of the debt of the country, which might be useful for various purposes, but it is not a measure of debt level. Also, it would make sense to use the same rate for every country since discount rate will be almost certainly heterogenous for different countries.


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