Sovereign debt crisis

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Sovereign debt - sovereign risk - default.

Widespread conditions of potential or actual default by indebted countries, with increased sovereign risk and losses for lenders.

Debt sustainability problems worsen over time
"Sovereign debt crises are costly for sustained growth.
One study finds that every year a country remains in default reduces its GDP growth by 1–1.5 percentage points.
High levels of sovereign debt also have significant social costs.
They reduce the government’s ability to spend on social safety nets and public goods such as education and public health, which can worsen inequality and human development outcomes.

When debt sustainability problems are not resolved, they tend to worsen over time because the choices of each government constrain the options of future governments as more revenue is directed to debt service.
Sovereign debt crises also frequently coincide with other types of economic crises - such as financial sector crises, rising inflation, and output collapses - that have far-reaching negative consequences for poverty and inequality."
International Monetary Fund - World Development Report 2022 - p204.

See also

External link