What is the Meaning of: External debt | Concept and Definition of: External debt
From the Latin debĭta latin, debt is a term which refers to the requirement that a person must pay, reimburse, or satisfy compared to another individual. As a general rule, the concept is related to money.
Exterior (e), on the other hand, is an adjective that indicates this which occur or occurs outside or even abroad (as opposed to inside).
The concept of debt is therefore linked to the debt the country has with foreign entities, including both the public debt (owed by the State) as the private debt (owed by individuals).
Often, external debt continues with supranational organizations such as the World Bank or the IMF (International Monetary Fund). If a country (the borrower) has trouble paying its debt (i.e., to return the money with interest mutually agreed), this situation is likely to initiate its economic development.
A nation decides to contract a debt when it allows it to keep its own resources or to receive resources from abroad to strengthen its development. Often, however, the debt burden and its respective interests end up affecting the country, which may have some difficulty to meet its payments.
Sometimes, the State asks for money for a particular purpose and eventually be used for a quite different purpose. This way, he contracted a debt and does not meet its objectives, while jeopardizing the future of the country.
In some cases, the debt becomes truly priceless for the country and creditors eventually forgive her (cancel) or, at least, to cancel the interest. Let us not forget that the State money intended to pay the debt and interest represents resources that are removed to other areas of its budget (such as health or education).