In order to repay principal and interest, the debtor country must give up a certain amount of consumer spending and investment spending; international commercial loans borrowed at market interest rates will have higher borrowing costs; if repayment occurs Debt peaks can easily lead to debt repayment difficulties and even debt crises, which will seriously damage the international credibility of debtor countries and reduce their international financing capabilities.
Often government loans and loans from international financial institutions have certain additional conditions. The additional conditions can be regarded as additional costs of borrowing. For example, government loans generally require that the debtor country urgently needs to import goods. . Another example is that when international financial institutions provide loans, they intervene in the economic activities of the debtor country on the condition that the debtor country implements "reform" of its economic system.
Many complex factors of international economic and financial turmoil will affect capital inflows in debtor countries, such as severe economic recession, inflation and budget deficits in creditor countries, their governments, Commercial banks may reduce or cut lending to debtor countries, or even stop making new loans. Uncertainty in the supply of foreign capital is often an important reason for debtor countries' repayment difficulties.
If foreign debt is used improperly and cannot bring in enough foreign exchange to repay the principal and interest, the debtor country will have to continue to borrow new debt to repay the old debt, making the debtor country Foreign debt creates dependence. The greater a debtor country's dependence on debt, the weaker its resistance to the impact of changes in the international financial market and the international economic environment.
