What is external debt

External debt is the amount that is formed as a result of the inflow of loan capital into the country. In connection with the receipt of third-party funds, there are obligations to repay loans, loans, loans and interest payments. The total external debt in the world is more than two trillion dollars. At the same time loans are borrowed only from countries with a limited convertible or non-convertible currency. For others, external debt is not formally a problem. Such powers can fulfill their financial obligations to non-residents by means of the national currency, changing it to a foreign one. Thus, these countries pay external debt using not only external, but also domestic assets. However, according to informal estimates, it is in these countries that financial obligations are greatest.

External debt can be private. It is about seven hundred trillion dollars. This amount is formed by the obligations of banks and firms.

There is also the concept of "external debt of the state". It is about 1.7 trillion. Dollars. It is formed from external financial obligations of state bodies (including local authorities) and from government-guaranteed third-party obligations in the private sector.

In terms of external debt, the leaders are Brazil, China, Russia, Argentina, Mexico, Turkey, South Korea, Indonesia. By the beginning of the decade, all these powers had more than one hundred billion financial obligations, and even two hundred billion dollars in Brazil.

Along with this, experts point out that external debt is burdened not only by its size, but also by payments on the loan.

The severity of financial obligations can be considered in the example of Russia.

According to expert data, the size of the country's external debt by the beginning of 2004 was equal to one hundred and eighty-two billion dollars. At the exchange rate relative to GDP, this was 42%, compared to 120% for the annual export of services and goods. These indicators are regarded by the authors as moderate.

The severity of servicing financial obligations can be determined with the help of another indicator. So, by 2003, Russia spent (according to expert estimates) about thirty-five billion dollars. Regarding the main source of foreign currency - revenues from exports of services and goods - this amounted to about 23%. A dangerous threshold is considered to be 20-25%.

Experts note that, despite the urgency of the problem of Russia's external debt, the content of its (problem) has changed somewhat. Today, private financial liabilities are more relevant. As a result of a significant inflow into the gold and foreign exchange reserves and the state budget of petrodollars, Russia's public debt tends to decline.

It should be noted that the financial obligations of the country have not only negative, but also positive aspects. Often, modern economists point to the severity of loan servicing, the emergence of political and economic dependence on creditors, and the inefficient use of loan funds. To a large extent this position is connected with the developing debt crisis in different countries. Along with this, other economists point out that foreign loans significantly improve the economic state of the state. The new industrial powers use an inflow of third-party loan capital for their rapid development.

It is quite difficult to strike a balance between the positive and negative sides of external debt. However, we can assume that the positive aspects outweigh the negative in a situation where borrowed funds are distributed so effectively that there are no difficulties in servicing financial obligations. To this end, according to experts, loan capital should be directed not so much to the restoration of the state budget, but rather to long-term investments in the economy of the country.