Debt distress
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Credit risk - borrowings.
Debt distress is a situation in which a borrower is unable to meet its financial obligations to creditors.
Borrowers in default are - by definition - in debt distress.
However, debt distress is a broader concept, also including situations where the borrower has not yet defaulted on its borrowing obligations.
Debt distress is a more serious form of financial distress.
- Self-fulfilling dynamics in debt distress
- "Governments that are near or in debt distress do not have room to provide even temporary fiscal support to firms and households.
- Moreover, an increase in the risk of debt distress typically leads to a downgrade in the sovereign credit rating, which sets off self-fulfilling dynamics because the downgrade itself deteriorates macroeconomic fundamentals and the access to capital by private firms."
- International Monetary Fund - World Development Report 2022 - p207.
See also
- Credit rating
- Credit risk
- Default
- Downgrade
- eurozone crisis
- Financial distress
- Firm
- Fiscal
- Household
- Private
- Private sector
- Recession
- Rescheduling
- Restructuring
- Sovereign debt
- Sovereign debt crisis
- Sovereign risk
