sovereign default

Sovereign default occurs when a country's government is unable or unwilling to meet its debt obligations, meaning it cannot pay back money it borrowed from creditors or lenders. This typically happens when a nation faces economic challenges like recession, low government revenue, or excessive debt levels. Defaulting can lead to financial instability, loss of trust from investors, and economic hardship for its citizens. It may involve stopping payments on bonds or renegotiating terms. While a default is not common, it signals severe financial distress and impacts the country's ability to access international credit markets.