A country's gross external debt (or foreign debt) is the liabilities that are owed to nonresidents by residents.^: 5 The debtors can be governments, corporations or citizens.^: 41–43 External debt may be denominated in domestic or foreign currency.^: 71–72 It includes amounts owed to private commercial banks, foreign governments, or international financial institutions such as the International Monetary Fund (IMF) and the World Bank.

External debt measures an economy's obligations to make future payments and, therefore, is an indicator of a country's vulnerability to solvency and liquidity problems.^: xi–xii Another useful indicator is the net external debt position, which equals gross external debt less external assets in the form of debt instruments.^: 1–2 A related concept is the net international investment position (net IIP). Provided that debt securities are measured at market value, the net external debt position equals the net IIP excluding equity and investment fund shares, financial derivatives, and employee stock options.^: 44, 82