What are the causes of international debt problems
1. Improper use of foreign debt
After the debt scale and structure are determined, how to invest it in appropriate departments and maximize its use efficiency is the ultimate guarantee for repaying debt. In the long term, solvency depends on a country's economic growth rate, and in the short term, its export rate. So what people are really worried about is not the size of the debt, but the productivity and foreign exchange earning capacity of the debt.
After borrowing a lot of money, many debtor countries have not comprehensively considered factors such as investment amount, debt repayment period, project exchange rate, and macroeconomic development speed and goals to formulate policies. Trends in the use of foreign debt and debt repayment strategies, blindly engaging in large-scale project construction regardless of the limitations of the country's financial, material and human resources.
Because this type of project consumes money and has a long construction period, it is difficult to build production capacity and create sufficient foreign exchange in the short term, resulting in accelerated debt accumulation. At the same time, not only is the efficiency of using foreign debt for projects low, but a considerable part of the foreign debt does not flow into the production field or is used for the import of capital goods at all, but blindly and excessively imports durable consumer goods and luxury goods; this will inevitably lead to investment The decline in interest rates and the weakening of debt repayment capabilities.
Unreasonable consumer demand is also the reason for the reduction of savings rate, which makes the internal accumulation capacity unable to keep up with the growth of funds, thus promoting the further increase of external debt. Some countries borrow large amounts of short-term loans to make long-term investments domestically, and the investments are mainly in real estate and stock markets, thus forming a bubble economy. Once the bubble bursts, a crisis will come.
2. Lack of macro-level unified management and control of foreign debt
Foreign debt management requires the state to Debt and assets are managed technically and institutionally to increase the returns on international borrowing, reduce the risks of foreign debt, and achieve the most perfect combination of risks and returns. This effective management is key to avoiding debt crises. The scope of its management is quiteIt is extensive and involves all aspects of borrowing, using and repaying foreign debt, and requires policy coordination among various government departments.
If the management of borrowed foreign debt is chaotic, long-term borrowing, and uncontrolled introduction of foreign capital will often cause the debt scale to be out of control and the debt structure to become irrational, it will hinder the This allows the government to make timely adjustments to policies based on the actual changed debt situation. Once the government discovers that policies deviate too much from planned goals, debt repayment difficulties have often already occurred.
3. The foreign trade situation has deteriorated and export revenue has dropped sharply
As a country’s ability to earn foreign exchange from exports determines Once a country fails to adapt to changes in the international market and adjust its export product structure in a timely manner, its export revenue will be significantly reduced and its current account deficit will expand, thus seriously affecting its ability to repay principal and interest.
At the same time, the huge current account deficit has further caused dependence on foreign capital. Once international investors' confidence in the economic prospects of the debtor country is greatly reduced, they will stop lending to them or refuse them. If it is postponed, the debt crisis will break out. The debt crisis has seriously interfered with the normal order of the development of international economic relations and is a major hidden danger in the disorder of the international financial system. It has a huge impact especially on the countries where the crisis broke out, and will have a negative impact on economic and social development. serious consequence.
What is international debt
International debt, also known as foreign debt, is the amount of debt at any given time. All debts with contractual repayment obligations that have been disbursed and have not yet been repaid by residents of the country to non-residents, including the principal that needs to be repaid and the interest that needs to be paid.
Foreign debt (commercial debt) collection, international commercial debt collection cannot simply be understood as debt collection. International commercial debt collection refers to the legal conduct of commercial debt collection services through contact and cooperation with overseas commercial debt collection organizations, law firms, detective companies and other institutions, reducing corporate risk rates and bad debt rates, and preventing and circumventing corporate risks due to the use of credit sales. credit risk posed by the method.
What are the main manifestations of the unreasonable structure of external debt
Under other conditions being equal, external debt Structure plays an important role in the evolution of debt. The main manifestations of the unreasonable external debt structure are:
(1) The proportion of commercial loans is too large.
Commercial loans generally have a shorter term and can be used when the economy is good or all parties are unanimously optimistic about it.When the economy develops, international banks are willing to continue lending, so these countries can continue to "roll" development by borrowing new debt to repay old debt. However, once certain unstable factors appear in economic development, such as government fiscal deficits, huge trade deficits, or political instability, which cause market participants to lose confidence and foreign exchange reserves are insufficient to repay maturing foreign debts, the exchange rate will inevitably fall sharply. . At this time, banks are no longer willing to lend new loans when they expire. In order to repay maturing foreign debts, foreign exchange funds that were already in short supply were flowing out on a large scale, triggering a crisis.
(2) Foreign debt currencies are too concentrated.
If a country's foreign debt is concentrated in one or two currencies, the exchange rate risk will become greater. Once the foreign currency appreciates, the foreign debt will increase, making repayment more difficult.
(3) The term structure is unreasonable.
If the proportion of short-term external debt is too large and exceeds the international warning line, or the debt repayment period is not reasonably arranged, it will lead to a concentration of debt repayment time. If the liquidity is insufficient to pay If the foreign debt is overdue, a crisis will erupt.
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