What is an external debt?

External debt is a collective debt owed by a nation to foreign creditors. It includes debt received by citizens, businesses and government agencies, with creditors such as international organizations, foreign governments, foreign banks, etc. Many countries have a very high external debt, and the United States usually at the top of the list, but if they can successfully fulfill their debt, it cannot be considered a financial risk. However, nations with weak economies may have difficulty paying for their external debt, which may become a problem.

is usually an external debt in the form of a foreign currency. All money paid for interest, fees and other debt costs are also in this foreign currency. For countries with a strong currency, this does not pose a significant threat, as they will be able to successfully export goods and services to the country where the debt is to earn money to repay the debt. This leads to net drainage, goods and services to a foreign country, but if domestic companies also hold foreign debt, this outflow can be balanced by an influx from otherthe ground.

Some nations have a weak economy, often accompanied by declining currency values. This can cause external debt to become a serious problem because they cannot repay it. It is not possible to provide goods and services in a sufficiently high volume to raise funds to repay the debt, and the unfavorable exchange rate is to convert from one currency to another and losing the proposal. These nations usually do not have many of their own debts to balance the outflows for debt maintenance and as a result they can be impoverished.

Increasing external debt is a problem in some regions of the world. Some nations have such high rates of this type of debt that negotiations on bankruptcy and debt were necessary to solve the problem because they cannot repay the debt under the set conditions. It is assumed that a large external debt for some nations was a contributing factor in the economic crisis that began to explode at the beginning of 2000, PSeveral European nations, such as Greece, play an important role in debt failure.

government carefully monitors their own external debt, and government agencies usually follow the well -known debt of other nations. This information may become important if the decision to participate in borrowing, trade agreements, debt forgiveness and other economic activities are taken.