External Debt

What is 'External Debt'

The portion of a country's debt that was borrowed from foreign lenders including commercial banks, governments or international financial institutions. These loans, including interest, must usually be paid in the currency in which the loan was made. In order to earn the needed currency, the borowing country may sell and export goods to the lender's country.

BREAKING DOWN 'External Debt'

A debt crisis can occur if a country with a weak economy is not able to repay external debt due to the inability to produce and sell goods and make a profitable return. The International Monetary Fund (IMF) is one of the agencies that keep track of the country's external debt.

RELATED TERMS
  1. Foreign Debt

    An outstanding loan that one country owes to another country ...
  2. Sovereign Debt

    Bonds issued by a national government in a foreign currency, ...
  3. Debt

    An amount of money borrowed by one party from another. Many corporations/individuals ...
  4. Temporary Lender

    A mortgage lender that sells the loans it originates into the ...
  5. Lender

    Someone who makes funds available to another with the expectation ...
  6. Commercial Policy

    The regulations and policies that determine how a country conducts ...
Related Articles
  1. Managing Wealth

    Explaining Debt

    Debt is any amount a borrower owes a lender.
  2. Markets

    The Balance Of Trade

    The balance of trade is the difference between a country’s imports and exports. A trade deficit occurs when a country buys or imports more goods from other countries than it sells or exports. ...
  3. Investing

    What Does a Lender Do?

    A lender provides funds to another with the expectation those funds will be repaid with interest.
  4. Trading

    6 Factors That Influence Exchange Rates

    An in depth look at out how a currency's relative value reflects a country's economic health and impacts your investment returns.
  5. Trading

    Main Factors That Influence Exchange Rates

    The exchange rate is one of the most important determinants of a country's relative level of economic health, and can impact your returns.
  6. Investing

    Explaining Debt Service

    Debt service is a measure of a person or entity’s use of cash to pay interest and principal on debt obligations.
  7. Managing Wealth

    Commercial Real Estate Loans

    Obtaining a commercial real estate loan is quite different from borrowing for residential real estate. Here's what to expect and how to get what you need.
  8. Markets

    Sovereign Debt Overview

    The national or government debt is a combination of both internal and external debt. The external debt is referred to as Sovereign Debt. Sovereign Debt refers to bonds issued by a nation’s ...
  9. Personal Finance

    The Reality of Commercial Real Estate Loans

    It’s corporations and partnerships that most commonly take out commercial real estate loans.
  10. Markets

    Why Countries Keep Reserve Currency

    Central banks and financial institutions hold large amounts of foreign money as their reserve currency.
RELATED FAQS
  1. What are the typical day-to-day responsibilities of a Chief Operating Officer (COO)?

    Learn how a country's debt crisis affects the world, including how currency values, inflation and output are affected on ... Read Answer >>
  2. What is the difference between secured and unsecured debts?

    Learn the differences between secured and unsecured debt; discover how banks buffer risks associated with each type of loan ... Read Answer >>
  3. What is foreign exchange?

    Foreign exchange, or Forex, is the conversion of one country's currency into that of another. In a free economy, a country's ... Read Answer >>
  4. What are the main categories of debt?

    Learn about the different types of debt available for consumers including secured debt, unsecured debt, revolving debt and ... Read Answer >>
  5. What economic indicators are most used when forecasting an exchange rate?

    Discover what economic indicators are most widely used to forecast a country’s exchange rate and how various factors influence ... Read Answer >>
  6. What is the difference between International Monetary Fund and the World Bank?

    Learn about the International Monetary Fund and the World Bank and how they are differentiated by their respective functions ... Read Answer >>
Hot Definitions
  1. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  2. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  3. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  4. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  5. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  6. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
Trading Center