What happens when a country doesn’t pay its debts?

Question

Can they just ignore the debt like it never existed? Are there real reprucussions for the government or impacts to the econony?

In: 467

Answer 1

Depends on who’s holding that debt. If it’s the country’s citizens, then defaulting on that debt will undermine the citizens’ confidence in the government and its financial institutions thus affecting the economy. If it’s foreign governments or institutions, then they can impose sanctions and make demands until the debt as paid or restructured.