In the world, when a person does not repay the loan, banks or related institutions take recourse to the law. But when it comes to any country, the situation becomes even more serious. Many countries take massive loans, but when they are unable to repay it, what action is taken against them? Let us know what kind of consequences that country has to face if this happens.
How do people repay loans?
Often you must have seen that people take loans from banks, apps, or private sources.
- When the person does not repay the loan, the bank takes legal action.
- In some cases, actions like auctioning of properties and damaging credit scores are taken.
- But when a country takes on debt, the situation becomes more complicated.
world’s most indebted countries
World of Statistics releases the list of most indebted countries every year. According to 2023 data, these countries are in debt:
- America
- Total debt: $33,229 billion
- Most indebted country.
- China
- Total debt: $14,590 billion
- Japan
- Total debt: $10,797 billion
- UK (Britain)
- Total debt: $3,469 billion
- France
- Total debt: $3,354 billion
- India
- Total debt: $3,057 billion
- Ranked seventh in the list.
Ways to take loan
Countries borrow in different ways:
- Loans from International Banks:
- It is a common medium for countries to meet their economic needs.
- Loans from other countries:
- Under bilateral trade or political agreements.
- Business Loan:
- Taken for infrastructure or other projects.
What happens if loan is not repaid?
If a country does not repay its debt, it can have serious consequences:
1. Restrictions on trade
- Other countries stop trading with that country.
- The economic condition of a country that is unable to repay its debt deteriorates.
2. Blacklisting
- If the loan is taken from an international bank or financial institution and is not repaid, then that country is blacklisted.
- After being blacklisted, the country faces difficulty in obtaining funds in the international market.
3. Impact on global reputation
- Non-repayment of loans affects the creditworthiness of the country.
- Investors avoid investing in that country.
4. Direct impact on the economy
- Due to stoppage of import and export, the economic condition of the country becomes weak.
- This increases unemployment and inflation.
What do countries do in such situations?
When a country is unable to repay its debt, it has to resort to debt waiver or debt restructuring. In this:
- The loan repayment period is extended.
- New loans are given at lower interest rates.
- Some part is forgiven.
situation of india
India has a debt of $3,057 billion, but it is in a position to repay the debt. The Indian economy is stable and the country’s growth rate helps it repay its debt.
