External Debt (Foreign Debt)

External debt (or foreign debt) is that part of the government debt of a country which is owed to creditors outside the country. This debt includes money owed to private commercial banks, other governments, or international financial institutions such as the IMF and World Bank.

External Debt (Foreign Debt)

External debt (or foreign debt) is that part of the government debt of a country which is owed to creditors outside the country. This debt includes money owed to private commercial banks, other governments, or international financial institutions such as the IMF and World Bank.

Having understood external debt as that part of sovereign (or government debt) of a country which is owed to outsiders (or foreigners), it can be defined as the total outstanding liabilities to the external world on behalf of the host nation. This brings us to a clear proposition that any flow of funds from outside a country inwards, in the form of debt, shall comprise a part of the external debt of the country, provided it is borrowed on government account. A borrowing of an individual or corporate of a nation from outside is not included in this term external debt as it is one specific to or on behalf of the government.

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