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Information on external debts and their terms

Economic growth

Countries are self-sufficient in terms of domestic production, the percentage of exports, imports and industries from economically developed countries that are characterized by economic growth. The components of local productive services in addition to social services, and economic growth depends on the proper exploitation of natural resources, and one of the most important advantages of economic growth is to reduce the volume of external debts accumulated by the state or reduce the possibility of their occurrence, and in this article we will talk about external debts and their conditions.
Information on external debts and their terms
Information on external debts and their terms

What is debt?

Debt, which is called in English the term Debt, is defined as a group of sums of money borrowed by a person, state or institution by what is called the creditor, and the concept of debt is not limited to money only, it is possible for debts to be goods, services or goods Debt is used by many individuals, companies and organizations to make large purchases of a range of goods or services and commodities that would not be sustainable under normal circumstances.

The borrower is obligated to repay the debt to the creditor in a specific period of time to be agreed upon between the two parties, and one of the most important types of debts that individuals and institutions resort to are loans, where it is agreed to pay them within a not short period of time, depending on the amount of the borrowed amount, and is often imposed A percentage of the interest on the total amount borrowed during the repayment period or in the event of delay in repayment, as these interests are imposed as a means to ensure that the lender is compensated for bearing the risk of the loan while encouraging the borrower to repay the loan promptly and at the specified repayment time, in order to reduce the increase The total interest value, and the most important types of loans that individuals resort to are home loans, car loans and credit card debt.

external debt

External debts are defined as the sums of money borrowed by the state, companies or individuals from parties outside the country, where these debts are due to be paid to the lender on a predetermined date. This external debt by the borrowing country during a specified period of time with the addition of a percentage of interest on the total amount borrowed, where the interest must be paid on the amount borrowed in the same type of currency in which the loan was made.

Among the reasons that lead the state to resort to foreign debts are the increase in financial commitments and the proportion of spending, the deterioration of the agricultural sector, as a result of poor spending on it, spending of loans on consumer materials and tools and projects with financial returns and low profits, and the spread of administrative and financial corruption within companies and institutions, which leads to the failure of projects The internal and external development of the state, in addition to the economic, political and commercial instability, and the weak price of the local currency compared to other global currencies, and most of the borrowing countries export a group of goods to the creditor state in order to reduce the loan ratio, and studies indicate that the aggravation of the state’s external debt leads to the occurrence of Economic deficit, commercial and industrial depression.

External debt terms

External debt depends on a set of conditions that determine the ability of the borrowing country to fully meet its current and future financial obligations without the need to reduce the amount of the borrowed amount or reschedule the debt, in addition to achieving economic growth. These conditions are called financial sustainability conditions, and these conditions are carried out from During an analysis of the country’s ability to bear external debt in general in the context of a set of foundations and rules that include a set of numerical assessments that represent expectations of the behavior of economic variables and other factors through which debt stability conditions and other indicators are determined at certain levels, and among the most important conditions The definition of the International Monetary Fund is to provide evidence of the country’s ability to meet its current and future obligations in servicing the external debt in full and without working to reschedule these debts in the future. Foreign exports, in addition to the ratio of financial revenues compared to the total debt.

External debt collapse

If the country has a weak economy and is unable to repay the total external debt due to the inability to manufacture, produce and sell goods and services and achieve profits, according to the International Monetary Fund’s statistics report on external debt, the country in this case suffers from a default in repaying the debt and this is called the collapse External debts, and in this case the International Monetary Fund resorts to a set of measures, the most important of which is scheduling the old external debts in new terms and postponing the repayment period, as well as reducing or canceling debts and replacing them with shares, and imposing a state of austerity on the borrowing country, and the aggravation of external debts without payment contributes to the deterioration of the situation It is also a major reason for the depreciation of the currency globally and the decline in the investment rate, so the borrowing country must provide evidence to the creditor country to prove its ability to pay the money within the specified period for repayment and without resorting to debt scheduling by the International Monetary Fund and whenever the country is delayed The borrower repays the money, and the creditor country increases the interest rate on the total amount, and in this case the deficit of the borrowing country increases for the payment of the sums owed thereto.
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