Sovereign debt

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1.

Narrowly, the loans outstanding of individual countries, usually negotiated by their respective governments.


2.

More broadly, the total amounts of loans owned both by central governments and by quasi-governmental organisations, including local government organisations, local central banks and other state-owned enterprises.


Sovereign debt hurts private sector
"High levels of sovereign debt also affect the private sector directly, such as through the government’s inability to provide ongoing support in a prolonged recession or economic setbacks during the recovery.
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


External link