What is a foreign debt?

Foreign debt , also known as external debt, is a term used to classify the amount of money owned by the country to other countries or external banking organizations such as the World Bank. There are many reasons why the country can decide to go to foreign debt, including infrastructure development or economic stimulation. Since 2009, an estimated foreign debt for all world countries has been around $ 56.9 trillion in the US (USD).

The idea of ​​a foreign debt is hardly new; It was not unusual to borrow money or sources from friendly territories since the increase in civilization. Wars were conducted, cities were built and natural disasters were built due to the concept of foreign debt. The United States has used an external loan policy since its foundation; The revolutionary war was largely funded by the loans of nations of friendly colonist affairs. These are essentially banks subject to international laws and run an officialI Member Nations. Many of the most famous IFIS were established after WW II, when the economic relief was very needed to bandage many bleeding and damaged countries that remained after the global war.

Since then, many IFI has specialized in developing or third world loans to help improve both infrastructure and economic persecution in the hope of benefiting from the global economy. Some critics of IFI suggest that these institutions are developed with corruption and potential danger and claim that international law is a poor and extremely vague set of instructions created by unleashed officials. Many people disagree with the idea that a democratic country with a clear ensemble of laws could be subject to international laws that its citizens did not even vote for the elelemen.

One term that often appears when considering foreign debt is sustainerNost . In order to be sustainable, the country must have a sufficiently high gross domestic product (GDP) to repay and eventually pay off the debt and continue its own economic function. A country with a high GDP content or a large employed population can therefore be able to maintain much more debt than a small or poor country. In the US, for example, the 2009 debt was about $ 13.5 trillion, USD, but equal to 98% of GDP. Zimbabwe, on the other hand, has a much lower debt of over $ 5.8 billion, but this amount is 282.6% of GDP

Because it is generally in the interest of the global economy to keep each other above water, countries that cannot pay their foreign debt often have different possibilities of extension and forgiveness. Some richer countries will offer debt relief in return for trade agreements or in exchange for introducing economic resources improvement such as women's education. The hazard in high foreign debt is extreme: if one country owes another high majority of debt, the borrowing rule can be borrowedd decide to call on all debts due as a means of promoting economic control, to change the ownership of the indebted nation for its creditors forever.