External debt refers to the actual outstanding liabilities (and assets) relative to non-residents at any given time. The principal and/or interest must be paid by the debtor at one or several points in the future. For the euro area, external debt measures the indebtedness of all euro area residents to the rest of the world. Residence is determined by a person or entity’s main centre of economic interest, not by nationality.

The most common indicator of external debt is gross external debt, which measures a country’s total debt to foreign creditors. In other words, it only considers a country’s liabilities, not its assets. 

A more comprehensive statistical indicator is net external debt, which subtracts external assets (in debt instruments) from gross external debt. Since this accounts for both liabilities and assets, it gives a clearer picture of the net debt burden relative to the rest of the world.

External debt encompasses both private and public debt held by residents, and includes debt securities, loans, trade credits, deposit liabilities, other accounts payable and special drawing rights. Equity and investment fund units (e.g. shares held by foreign investors in domestic firms) and financial derivatives are not included in external debt indicators. The government, businesses and citizens of a country can all be debtors.

The external debt statistics presented in the ECB Data Portal are calculated based on the international investment position and are broken down by institutional sector, instrument and original maturity. However, intercompany lending reported under direct investment is excluded from external debt detailed breakdowns. This is because such lending is typically the result of a multinational company's internal strategies, rather than standard borrowing and lending activity. 

What can the data tell us? 

Gross external debt is always expressed as a positive value. Net external debt, however, can be either negative or positive, depending on whether the debt assets exceed the debt liabilities, or vice versa:

  • Positive net external debt occurs when a country’s debt liabilities exceed its debt assets, i.e. it is a net external debt debtor.
  • Negative net external debt occurs when a country’s debt assets exceed its debt liabilities, i.e. it is a net external debt creditor.

 

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