Net Borrower

DEFINITION of 'Net Borrower'

An entity that borrows more than it saves or lends out. A net borrower could be a company, country, government, group or individual. Borrowing can take the form of debt by acquiring goods and/or services under the stipulation of future payments, borrowing funds, or by issuing debt, such as bonds. Net borrowing occurs when the monetary summation of these borrowing activities exceeds the monetary amount of funds and assets lent/saved. Also known as "net debtor".

BREAKING DOWN 'Net Borrower'

A country is a net borrower when it is running a deficit and is also known as a capital importing country. For example, a country might acquire capital by selling debt instruments such as bonds to international investors or to its own residents.

This is not considered good or bad for a country. If a country has a capital inflow then the international community feels it's a safe place to invest. Also capital inflows potentially allows for future levels of productivity that would otherwise be unattainable.

Net borrowers will be worse off when interest rates go up if their borrowing rates are not fixed.

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