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There are debtor and creditor countries as well. There are countries that are net borrowers as already mentioned. These countries are also known as the debtor countries. Then again there are the creditor countries.These are the net lenders.
Being a debtor or creditor depends on only one factor. The total stock of foreign investment of course.The United States was initially a debtor country. They had borrowed a lot from the European nations of course. They borrowed to expand and develop.
Then they of course worked hard and cleared their debts. Then they became the creditor country. But as time passed, the scenario changed. Now of course the United States is a debtor country again. Since 1986, the situation is like this only.
Unfortunately the most developed countries are actually the largest debtor countries. It is of course because these are capital-hungry countries. Of course this is why the “Third World debt countries” formed in the 1980s. It is because the debts increased a lot. From the smaller 1/3rd of the gross domestic product to more than a half.
We should though understand the utilization of this borrowed amount. Is the country utilizing it for development? Or is the country using it to repay loans and consumption?
If it is using to develop then of course this is good. If this country is using for the later purpose then of course it isn’t worth it.
Links of Previous Main Topic:-
- Definition of Economics
- Economic Problem
- Market Equilibrium
- Employment and Unemployment
- Measuring GDP and Economic Growth
- Economic Growth Macroeconomics
- The Exchange Rate and the Balance of Payments
- The Foreign Exchange Market
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