Internal Debt Vs. External Debt

Difference Between Internal Debt And External Debt

There is often some confusion. What exactly is the difference between public debt and external debt?

The national debt is what the state borrowed to cover deficits in the state budget. As soon as government’s expenditure is greater than the income they have to borrow and the debt grows. Unlike private individuals, however, State did not go to the bank and apply for loans in the usual way. Rather than sell bonds, especially bonds, which gives interest rate the holder.

We borrow from ourselves

Interest rates on government’s debt are paid through tax assessment. But because the bonds are often bought by investors, such as banks, pension funds and individuals, we are also lenders. We get back return from bonds, either directly through interest rate on our bonds, or through our pensions. We borrow words from ourselves.

Foreign debt is instead the nation’s debt to cover current account deficits, that is, when the import value is greater than the value of exports. Here a nation is  borrowing it from the outside world. External debt includes not only the State but also the private sector.

What are the risks the national debt?

In countries that suffer from major and growing public debt, there is reason for concern for future generations. These will, in fact have a reduced scope for consumption of money as a result of interest payments.

 

Category: VS  |  Tags: