This debt is used by the countries and is considered a source of financing since the economic obligations it contracts are usually carried out with the aim of bearing an expense that cannot be met with its own resources, but rather requires external sources. It is very important that countries have accurate economic statistics and analysis, if they want to make decisions that can effectively correct a crisis or economic problem. To do this, tools such as economic indicators are used , of which the foreign debt is a part. External debt is an indicator that provides many data at the macroeconomic level , such as financial information and the sustainability of a country, which is why it is very relevant for these measurements.
However this instrument can harm Bosnia and Herzegovina Phone Number a financing capacity and become negative for its economic growth if certain factors are not taken into account. What is foreign debt for? External debt allows countries to finance their various public expenditures , increase their production capacity, reduce GDP volatility and improve their monetary growth, by providing them with resources that can later be invested. This instrument is mainly used by countries with low levels of capital , since it represents a method of financing to carry out certain projects. Causes and consequences of foreign debt The main causes and consequences of external debt are described below: Causes Wanting to achieve higher levels of growth the volatility of GDP .
Erroneous investments by the State which cause an imbalance of own monetary resources. Cope with an economic crisis caused by pandemics, natural phenomena, wars, etc. Fall in prices of exported goods and services. Impact It can cause unsustainable economic situations, generating conditions of vulnerability for the country. It can reduce the local development of the country, since after receiving the economic resources the country will have to pay, which can sometimes mean that the speed with which it operates decreases. It can increase poverty levels . Declines in foreign investment and income . Capital flight.