Sovereign Debt
Sovereign debt refers to the money borrowed by a country to finance its activities and operations. When a government runs a deficit (spending more than it earns), it often issues bonds, which are promises to repay borrowed money with interest. Investors, including other countries, buy these bonds. Sovereign debt can be a useful tool for funding public services and infrastructure, but if a country accumulates too much debt relative to its economy, it may struggle to repay and face economic challenges, potentially leading to default, where it cannot meet its obligations.
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Sovereign debt refers to the money that a government borrows to finance its operations and projects. When a government spends more than it collects in revenue, it may issue bonds or take loans to cover the deficit. Investors buy these bonds, essentially lending money to the government, which promises to pay back the principal with interest over time. Sovereign debt can affect a country's economy; if it becomes too high compared to its income, it may struggle to repay, which can impact its credit rating and lead to financial instability.