What are the basic characteristics of a debt crisis situation?

Debt crisis refers to a large amount of debt in the field of international lending that exceeds the borrower's ability to repay the debt, resulting in the inability to repay the debt or the need to postpone debt repayment. In the 1980s, developing countries were severely troubled by debt. There are multiple indicators to measure a country's ability to repay its foreign debt, the most important of which is the external debt repayment rate indicator, which is the ratio of a country's repayment of principal and interest on its external debt in a year to its export foreign exchange receipts of the current year or the previous year. Under normal circumstances, this indicator should be kept below 20%. If it exceeds 20%, it means that the foreign debt burden is too high. Next, the editor of Legal Savior Network will introduce the characteristics of the debt crisis situation in detail.

1. Huge scale

After the debt crisis broke out, the total debt of developing countries It grew rapidly, reaching US$993.2 billion in 1988 and exceeding US$1.3 trillion in 1990. What is particularly serious is that since 1984, due to the accumulation of total debt and the increasing burden of principal and interest repayments, as well as the reduction of international commercial loan funds, international lending capital has formed a net outflow from developing countries to developed countries. In 1988, the net outflow of funds from developing countries exceeded US$50 billion, which shows that the debt burden problem is quite severe.

2. High concentration

Since 1982, the developing Half of the country's foreign debt is concentrated in a dozen countries, mainly middle-income developing countries in South America. In 1989, their total debt was still growing, and the proportion of debt principal and interest that should be repaid that year to their export revenue was still more than 40%, far exceeding the internationally recognized warning line of 20%. Their total debt accounted for 10% of their national product. The proportion of total value is still more than 50%. Moreover, for these heavily indebted countries, more than 70% of their debts are loans owed to international private commercial banks, so the burden of repaying principal and interest is very heavy.

3. Difficult Situation

Countries with the heaviest foreign debt burden Among them are African countries located in southern Sahara, which is the poorest region in the world. Although their total external debt is not large compared with the major debtor countries in South America, it was still less than 130 billion US dollars at the end of the 1980s, and about 70% of it was official loans, but their total external debt is almost equal to their gross national product.

The above is the debt summarized by the editor of Legal Savior Network for everyoneThe basic characteristics of crisis situations, I hope it can bring you some help.