1. World problems
  2. Defaults on international loans

Defaults on international loans

  • Debt repudiation
  • Arrears in international debt payments

Nature

Defaults on international loans may take several forms: repudiation of old loans by new governments swept into power during economic crises; failure to earn or unwillingness to expend foreign exchange to effect the transfer despite the fact the revenues are available in the domestic currency; and failure to collect sufficient revenues to cover debt service even when current expenditures have been drastically reduced (namely bankruptcy of the borrower).

Background

The last major wave of defaults occurred in the 1930s but still influences thinking in connection with the international capital market. In 1935, 35% of the UK holdings of government and municipal securities were in default. In the same year 38% (Europe 51%, Canada 4.0, South America 77, Latin America 76, others 3.0) of the outstanding portion of foreign dollar bonds originally taken in the USA were in default. In many cases government loans secured by specific revenues were simply repudiated. Solvent corporations were often forced into default by exchange controls. Many developing countries, and particularly those in Latin America, were faced with an unpleasant choice: to cut back drastically on imports or go into default on their debts. After an initial attempt to cut imports, the second course was often adopted. Today the less developed countries are still paying for the consequence of this choice in reduced access to international capital markets. Thus, from the 1930s to the middle 1980s, the problem of defaults dominated discussions of the international capital market and the question of access by less developed countries to that market. The first prescription of every commentator was to 'solve the defaults problem'.

Incidence

It is estimated that by the end of 1990 15 developing countries will owe about $524 billion to banks and governments, with nearly another $50 billion in interest payments falling due.

Claim

Defaults on international loans are a critical global crisis that cannot be ignored. When countries fail to honor their debts, it destabilizes economies, devastates millions of lives, and erodes trust in the international financial system. These defaults trigger currency collapses, soaring unemployment, and social unrest, spreading chaos far beyond national borders. Addressing this issue is urgent—global stability and prosperity depend on responsible lending, borrowing, and robust mechanisms to prevent and manage defaults.This information has been generated by artificial intelligence.

Counter-claim

Concerns about defaults on international loans are vastly overblown. The global financial system is robust, with mechanisms in place to absorb and manage such events. History shows that markets adapt quickly, and the impact on everyday people is minimal. Instead of fixating on rare defaults, we should focus on real issues like poverty and climate change. International loan defaults are simply not a pressing problem in today’s resilient economic landscape.This information has been generated by artificial intelligence.

Broader

Unpaid debts
Unpresentable

Narrower

Aggravates

Aggravated by

Related

Strategy

Providing loans
Yet to rate

Value

Repudiation
Yet to rate
Overpayment
Yet to rate
Default
Yet to rate
Debt
Yet to rate
Arrears
Yet to rate

Reference

Metadata

Database
World problems
Type
(D) Detailed problems
Biological classification
N/A
Subject
Content quality
Presentable
 Presentable
Language
English
1A4N
D3053
DOCID
11430530
D7NID
146955
Editing link
Official link
Last update
Oct 4, 2020