Definition of Net Foreign Debt

Definition of Net Foreign Debt

Net foreign debt is the difference between total foreign debt and total domestic debt.

With a net foreign debt, we mean the debt that a country owes to overseas investors, while still owning a comparable or smaller amount of shares issued by foreign companies.

Net foreign debt is usually expressed as the total amount of loans and other debts minus the claims on others owned by those residing in the same country. One can roughly divide international finance between ‘Rows’ and ‘Credits’.

The definition of net foreign indebtedness is an indicator that measures whether a country is borrowing from other countries or lending to other countries. The greater the negative value, lower for instance -100, the larger the amount of debt it owes to foreign lenders relative to debt owed by foreign lenders to it (i.e. net international lending).

In economics and balance of payments accounting, net global FDI within a country's global balance of payments equals businesses' and individuals' investments in securities type claims or loans that are likely settled in the country's currency and receivables on investment abroad of the same business that are likely settled in a different currency. Net international investment results show how trade in advance within a country affects its overall ownership stake in countries else where. It goes hand-in-hand with another concept called current account surplus/deficit as these two features involve life non-sustainable input/output transactions with other states/countries on financial markets.

Net foreign debt is a term which relates to international financial aspects.

It is most commonly used as a ratio where net debt incurred in one year, subsequent to adjusting for any fair value changes, divided by gross domestic product during the same period

This does not provide any information about a country’s ability to repay its debts. It just indicates whether the national balance sheet has increased or decreased in the process of obtaining funds or disbursement respectively from overseas

Read Next
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Cookie Policy