Which Country Has No National Debt? Exploring Debt-Free Nations and the Global Debt Puzzle

Ever heard the phrase 'national debt' tossed around and wondered if escaping debt is just a pipe dream for countries? Pretty much every time news breaks about another country’s huge debt level, someone asks: is there a nation that owes nothing? This question isn’t just a quirky bit of trivia—debate swirls around it on social media and in politics, especially whenever another budget deficit makes headlines. You might be shocked to find out how few countries fit the bill—some literally don’t have government debt at all. But does that actually mean they’re richer, safer, or more stable than the rest of us juggling IOUs?

What Is National Debt and Why Do Countries Have It?

First up, we need to get what "national debt" actually means. It’s not like owing your mate twenty bucks—it’s on a whole other scale. National debt is the total money that a government borrows to make up for the gap between what it earns (taxes, exports, and so on) and what it spends (healthcare, roads, defence, and so on). If the government spends more than it brings in, it has to borrow to cover the rest, sometimes by selling bonds or taking loans. This debt gets measured as "gross debt"—the total without subtracting cash assets.

Now, why would a country willingly go into debt? Sounds reckless at first, but it’s actually a tool. Picture a government investing in big-ticket things—say, a new railway, relief from a natural disaster, or a big cash drop to support an economy in crisis (like during COVID-19). Rather than hiking taxes overnight, they borrow, betting that future growth will let them pay it back without choking the population. Even top economies like the US, Japan, and UK do this, though Japan stands out the most, with government debt rising to over 250% of its annual economic output.

Going into debt isn't viewed as inherently bad by most economists. Debt can be downright beneficial, financing much-needed development and smoothing out economic bumps. Problems crop up when it balloons far beyond what a country can easily handle. For example, Sri Lanka's debt crisis in 2022 led to sky-high food prices, blackouts, and tons of public anger as the government defaulted. But on the flip side, some countries keep their books squeaky clean, either by running lean governments or having small populations and special financial structures.

Countries With No National Debt: Who Are the Outliers?

So, here’s the crazy part: if you’re looking for a major country—a place with millions of people, big cities, bustling industries—that has zero national debt, you’ll come up empty-handed. Every large economy borrows. However, there are a handful of outliers that technically report no national debt.

According to the International Monetary Fund (IMF) and CIA World Factbook, two countries have consistently made headlines for reporting zero government debt on their books in recent years: Liechtenstein and Brunei. But what’s really going on there?

Take Liechtenstein, for example. This tiny Alpine country has about 39,000 people—about the population of a Sydney suburb. Thanks to its strong banking sector, pricy financial services, and low government spending, Liechtenstein pays its bills and then some. Instead of running deficits, it produces budget surpluses and often puts extra money aside. It reported no gross government debt on IMF tables in 2024. It helps that the country doesn't dole out expensive social programs or have a military to fund.

Then there’s Brunei. Brunei is a small oil-rich nation on the island of Borneo, with a population of around 450,000. The government owns the oil and gas industry, which makes up over half the country’s GDP and more than 90% of exports. Revenues from oil and gas fund massive government spending, and citizens pay no taxes. With so much oil wealth and a very small population, Brunei hasn’t had to borrow; in fact, it invests its surplus overseas. As of the latest IMF reports, Brunei posted zero public debt for years.

There’s also Hong Kong and Macau, both special administrative regions of China. They often report either zero or negligible direct government debt. Hong Kong’s fiscal discipline means it only spends what it takes in, while its strong industries—banking, trade, real estate—keep income flowing.

If we zoom out, though, you’ll see that debt-free countries tend to have stuff in common. They’re usually tiny, have specific sources of serious wealth (like oil or finance), and don’t face the pressures of funding vast public services. There’s no debt-free country in the G20 or any of the world’s economic powerhouses. Even countries that pride themselves on being financially cautious, like Switzerland or Singapore, have some public debt, often used as a tool for investment.

Why Don’t More Countries Aim for Zero Debt?

It sounds dreamy—no debt, no interest payments, no need to worry about future repayments, right? So, why don’t more countries go all-in on being debt-free?

The simple answer: It’s not practical for most nations. For a start, running a country is expensive. Big nations have millions of residents relying on public services, infrastructure, defense, education, pensions, and health systems. Covering all this from only tax revenue would mean either hiking taxes sky-high or scrapping social benefits millions depend on. Try telling a major city’s residents their roads won’t be fixed because the government refuses to borrow—it wouldn’t go down well.

Plus, 'going into debt' isn’t automatically negative. Bonds—essentially IOUs—are a mainstay in financial markets, not just governments. Governments sell bonds to investors, paying interest over time. Many see this as a safe investment. It’s a major way to attract overseas investment and keep markets stable.

Contrast Norway with Brunei for a minute. Norway is also oil-rich, but it’s spent decades investing its oil profits in a sovereign wealth fund (worth more than $1.5 trillion) and still keeps some public debt. That’s not because Norway is reckless, but because debt allows more simple management of cash flow in tough years, and selling bonds helps regulate financial markets.

Also, global crises hit all countries, big and small. Think wars, pandemics, or economic crashes. For example, during COVID, Australia’s government debt rose by more than 10% of GDP because it provided wage subsidies for millions of people and businesses. Not borrowing in that situation would have meant mass unemployment and a brutal recession.

Another reason: having some public debt helps create a government bond market, which acts as a benchmark for borrowing costs for everyone else—businesses, banks, even homeowners. Countries without these markets can be risky or less attractive for investors.

Are Debt-Free Countries Better Off Financially?

Here’s the twist: being debt-free doesn’t always mean a country is ‘richer’ or ‘better run.’ There are perks, sure—like not having to pay interest or worry about debt repayments. And it may add to the country’s reputation for being stable. But it usually means the country’s government is tiny and often so is its economy.

Let’s look at actual numbers. Here’s a quick table showing some key figures for 2024, cobbled together from the IMF and World Bank:

See the pattern? The debt-free club has some of the tiniest populations and economies. They’re incredibly unique, with special circumstances. Their global influence, for better or worse, is pretty modest. Meanwhile, the world’s biggest economies are also its biggest borrowers. It’s like comparing a household that never borrows because it doesn’t need to—the cost is small and income is stable—to a business that takes loans to grow or handle tough years.

For personal finance fans, there’s a similar lesson. Taking on debt isn’t always bad—mortgages, student loans, and business loans all play a role. The trick is taking on the right amount, for the right reasons, and always being sure you’ve got a plan to repay. Countries do the same, just on a much, much bigger scale.

If you’re curious about global numbers, the IMF’s 2024 database says the average government debt among all countries sits around 93% of world GDP. That’s up from just 61% in 2008, mainly due to economic rescue packages during global crises. It’s not hard to see why most governments don’t even try shooting for zero debt—the bar is just set way too high, and sometimes, using debt wisely is simply the best move available.

So, next time you hear a politician or pundit calling for a debt-free national budget, think about those tiny, oil-rich or banking-powered countries. For most places—and most people—debt isn’t a disaster. It’s more about how you manage it than whether you have it at all.