What Is National Bankruptcy?

The concept of "national bankruptcy" was introduced in 2002 by the International Monetary Fund (IMF). It refers to a country's external assets are less than external liabilities, that is, the state of insolvency.

State bankruptcy

(Financial term)

The so-called bankruptcy means when

"National bankruptcy" is more like an adjective to reflect the critical situation of a country's economy; rather than a verb, it does not indicate that a country will soon blow its lights and change its doors. Take Iceland, for example, even though its external debt far exceeds its GDP, it can still find ways to overcome difficulties in the framework of the existing international order.

If the country goes bankrupt and the government has too much debt to repay, all citizens will carry the debt until someone takes over or pays it off. In the end, all citizens will live in internal and external debt, and their economy will be in danger of collapse. If the borrowing country controls the bankrupt country in this way, its country will become

At present, there is no good solution to prevent national bankruptcy, but reducing excessive foreign currency holdings or the first measure.

For countries that have had national bankruptcy, borrowing is clearly imminent. Iceland, an island nation with a population of only 300,000, has experienced extraordinary development in the financial industry for more than 10 years. The financial industry has launched large-scale credit transactions with foreign countries. The merger and acquisition boom in Europe by companies in other industries has also complemented the development of the financial industry. As a result, the Icelandic currency depreciated sharply, and the Icelandic Krona's exchange rate against the Euro shrank by 30%. Iceland has sought help from other countries in this regard, and only the Nordic neighbors have helped. "In this case, people have to make new friends." Russia has accumulated a large amount of foreign exchange reserves through energy trade in recent years, and it is not difficult to provide assistance to Iceland. Whether this problem can be solved through this approach remains to be seen.