Every year, we always hear news about the increasing debt of countries around the world.
Sometimes Min wonders, who does the world actually owe? Planet Mars?
Although it may sound strange, the world is not in debt to aliens or other planets. On the contrary, countries owe money to three main parties: international financial institutions, other countries, and investors in their own countries.
This global debt structure forms a very large and interdependent financial network.
Among the largest institutions are the IMF and the World Bank, which finance countries facing crises or developing infrastructure.
Their funds come from contributions from member countries and bond issuance, and are traditionally controlled by developed countries such as the United States and European countries, showing their great influence in the global financial system.
In addition, many countries also owe money directly to other countries, especially China, which is now one of the world's largest lenders through development banks and overseas infrastructure projects.
The United States and Japan also play a role as global lenders. However, not all debt comes from abroad.
Many countries, including Malaysia, rely more on domestic debt. In Malaysia, only about 2.5% of government debt is external, while the rest is held by local institutions such as the EPF, commercial banks and insurance companies, making exchange rate risk lower.
Several countries are at very high debt levels that require ongoing support from international institutions, such as Argentina, Ukraine, Egypt, Pakistan and Sri Lanka.
Factors such as currency crises, wars, or fiscal weakness have caused them to be trapped in debt cycles that are difficult to reverse.
In the Malaysian context, national debt remains manageable as long as economic growth is stable, borrowing remains productive and debt limits are adhered to in accordance with established laws. The ringgit-based debt structure also makes management more orderly and less exposed to external risks.
The key issue is not who lends, but who controls the financial system. Understanding this helps us see how economic power works and how each country manages its debt stability.
