Ideal Debt to GDP Ratio for Forex Traders

3 min read

The ideal debt to GDP ratio for a country is highly dependent upon the country’s economic conditions and policies. A balanced debt to GDP ratio is typically viewed as being between 40 to 60 percent. This range allows for a level of debt, while avoiding excessive leverage and reducing the risk of a debt crisis. Forex reserves play a key role in a successful debt to GDP ratio, enabling countries to borrow more money and fund their needs when times are tough. A strong balance sheet with adequate foreign currency reserves allow governments to borrow money more cheaply, and repay debt more easily in the event of a crisis. A favorable debt to GDP ratio can also make it easier for a country to access additional external funding, as lenders view it as a sign of financial health.