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Debt-To-GDP Ratio

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Definition of 'Debt-To-GDP Ratio'

A measure of a country's federal debt in relation to its gross domestic product (GDP). By comparing what a country owes to what it produces, the debt-to-GDP ratio indicates the country's ability to pay back its debt.

The ratio is a coverage ratio on a national level.

Investopedia Says

Investopedia explains 'Debt-To-GDP Ratio'

This measure gives an idea of the ability of a country to make future payments on its debt. If a country were unable to pay its debt, it would default, which could cause a panic in the domestic and international markets. The higher the debt-to-GDP ratio, the less likely the country will pay its debt back, and the higher its risk of default.

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