question: How do countries go into debt? Can’t they make their own money
comment: There are two main problems with this. The first is inflation. If you make more money, without also making more *stuff*, the amount you can buy for a pound, a dollar, a yen, etc. tends to go down. That's basic supply and demand: if there's more of something, its value compared to something else goes down. So you *can* print money to pay off debts, because that £15bn debt stays at £15bn, but doing so can come with side-effects. In fact, most countries kind of do this a bit, as inflation is a normal feature of the economy. The second is that sometimes debts are in foreign currencies. That's particularly true for less wealth countries, who might owe money in US dollars, euros, Russian rubles, etc.. You can print more of your own money, but then you have to change it into another currency. This is actually a lot like the first problem, eg. you're basically trying to get rid of a load of your currency in exchange for another. Supply goes up, value goes down. Except it's worse in this case, because it's not just the knock-on effects that are a problem, the cost of paying the debt goes up. A third issue that's worth highlighting is that not all countries are able to print their own money - most notably countries in the eurozone, like Greece.
passages: Governments create debt by issuing government bonds and bills. Less creditworthy countries sometimes borrow directly from a supranational organization (e.g. the World Bank) or international financial institutions.
   Under each category there are a number of financiers, all with varying policies and guidelines regarding their procedures, security, pricing and target markets. There are providers of import and export factoring, and their conditions vary widely.
  
  Section::::Transaction structure.
   Those considerations do not apply to private debts, by contrast: credit risk (or the consumer credit rating) determines the interest rate, more or less, and entities go bankrupt if they fail to repay. Governments need a far more complex way of managing defaults because they cannot really go bankrupt (and suddenly stop providing services to citizens), albeit in some cases a government may disappear as it happened in Somalia or as it may happen in cases of occupied countries where the occupier doesn't recognize the occupied country's debts.
   Section::::Debt monetization.
  
  Debt monetization is the financing of government operations by the central bank. If a nation's expenditure exceeds its revenues, it incurs a government deficit which can be financed by the government treasury by 
  
  BULLET::::- money it already holds (e.g. income or liquidations from a sovereign wealth fund)
  
  BULLET::::- issuing new bonds
  
  or by the central bank by
  
  BULLET::::- money it creates "de novo"
   In the latter case, the central bank may purchase government bonds by conducting an open market purchase, i.e. by increasing the monetary base through the money creation process. If government bonds that have come due are held by the central bank, the central bank will return any funds paid to it back to the treasury. Thus, the treasury may "borrow" money without needing to repay it. This process of financing government spending is called "monetizing the debt".
   Section::::Monetary financing.:Restrictions.
  
  Monetary financing used to be standard monetary policy in many countries, such as Canada or France, while in others it was and still is prohibited. In the Eurozone, Article 123 of the Lisbon Treaty explicitly prohibits the European Central Bank from financing public institutions and state governments. In Japan, the nation's central bank "routinely" purchases approximately 70% of state debt issued each month, and owns, as of Oct 2018, approximately 440 trillion JP¥ (approx. $4trillion) or over 40% of all outstanding government bonds.
   BULLET::::- Public debt per person: $1,515.28
  
  BULLET::::- Population: 109,805,464
  
  BULLET::::- Public debt as % of GDP: 45.8%
  
  BULLET::::- Total annual debt change: 8.4%
  
  Section::::Debt process.
  
  Developing countries use external borrowing as a mechanism to address the gap between domestic savings and desired investment and the export-import gap.
  
  In practice, debt management involves coordinating several major aspects of economic decision-making that have a bearing on loan contracting, utilization and the debt servicing needs and capabilities.
  
  Section::::Debt process.:Institutional creditors.
   Debt crisis
  
  Debt crisis is a situation in which a country is without the ability of paying back its government debt. When the expenditures of its government are more than its tax revenues for a prolonged period, a country may enter into a debt crisis .In any country,the government finances its expenditures primarily by raising money through taxation. When tax revenues are insufficient, the government can make up the difference by issuing debt.
   To assist in the reinvestment of released capital, most International Financial Institutions provide guidelines indicating probable shocks, programs to reduce a country’s vulnerability through export diversification, food buffer stocks, enhanced climate prediction methods, more flexible and reliable aid disbursement mechanisms by donors, and much higher and more rapid contingency financing. Sometimes outside experts are brought to control the country's financial institutions.
  
  Section::::Recent debt relief.:2004 Indian Ocean earthquake.
   The International Monetary Fund often lends for sovereign debt restructuring. To ensure that funds will be available to pay the remaining part of the sovereign debt, it has made such loans conditional on acts such as reducing corruption, imposing austerity measures such as reducing non-profitable public sector services, raising the tax take (revenue) or more rarely suggesting other forms of revenue raising such as nationalization of inept or corrupt but lucrative economic sectors. A recent example is the Greek bailout agreement of May 2010. After the 2008 financial crisis, in order to avoid a sovereign default, Spain and Portugal, among other countries, have turned their trade and current account deficits into surpluses. Currently, some member countries of the CIS (Armenia, Tajikistan, Kyrgyzstan), some African countries (Cameroon, Egypt), etc., have accumulated central government debt levels surpassing half of those countries' GDPs.
   Governments borrow by issuing bonds. In the UK, the government also borrows from individuals by offering bank accounts and Premium Bonds. Government debt seems to be permanent. Indeed, the debt seemingly expands rather than being paid off. One strategy used by governments to reduce the "value" of the debt is to influence "inflation".
  
  "Municipalities and local authorities" may borrow in their own name as well as receiving funding from national governments. In the UK, this would cover an authority like Hampshire County Council.
  
  "Public Corporations" typically include nationalized industries. These may include the postal services, railway companies and utility companies.
   Some observers such as Professor Steve Keen of University of Western Sydney, believe that many countries are hurtling towards peak debt, fueled by excess borrowing and an addiction to credit. To such observers, it appears illogical to take on ever increasing debt just to bid against each other for the same assets. Nations must at some stage reach their maximum debt limit. The timeframe for reaching this limit is always unknown but some believe we are at that limit already, or very close, in many countries.
   This prototype model contains three agents, a government and two investors. The government will buy or sell its foreign reserves to fix its currency's exchange rate, while the two investors hold domestic currency and can continue holding it or sell it for foreign currency. In reality, there should be many money holders, but this simplified model captures key features of most cases. 
   Section::::Africa.:Debt-trap Diplomacy and Africa’s Economy.:Evaluation from all walks of life.
   Most debtor financing transactions are structured to operationally resemble an asset-based loan. The client submits its accounts receivable ledger to the finance company. The finance company processes the ledger and remits the funds to the client's bank account. Lenders often finance a percentage of the ledger, commonly 80%–85%, and hold the rest as a reserve. The percentage of the ledger that is financed varies and is based on the industry and risk profile of the client.
  
  The reserve is remitted to the client once the advances settle, when customers pay their invoices.
  
  Section::::Terms of providers.
   During the ongoing European debt crisis, several countries in the euro area find it difficult or impossible to roll over their government debt without the help of the third parties. 
   They may also be vulnerable to a sovereign debt crisis due to currency mismatch: if few bonds in their own currency are accepted abroad, and so the country issues mainly foreign-denominated bonds, decrease in the value of their own currency can make it prohibitively expensive to pay back their foreign-denominated bonds (see original sin).
   For countries like the United States, a large net external debt is created when the value of foreign assets (debt and equity) held by domestic residents is less than the value of domestic assets held by foreigners. In simple terms, as foreigners buy property in the US, this adds to the external debt. When this occurs in greater amounts than Americans buying property overseas, nations like the United States are said to be "debtor nations", but this is not conventional debt like a loan obtained from a bank.
   have borrowed heavily from China and others. Any new FOCAC loan pledges will likely take Africa’s growing debt burden into account. "
  
  Section::::China.
   Government debt, synonymous to sovereign debt, can be issued either in domestic or foreign currencies. Investors in sovereign bonds denominated in foreign currency have exchange rate risk: the foreign currency might depreciate against the investor's local currency. Sovereigns issuing debt denominated in a foreign currency may furthermore be unable to obtain that foreign currency to service debt. In the 2010 Greek debt crisis, for example, the debt is held by Greece in Euros, and one proposed solution (advanced notably by World Pensions Council (WPC) financial economists) is for Greece to go back to issuing its own drachma. This proposal would only address future debt issuance, leaving substantial existing debts denominated in what would then be a foreign currency, potentially doubling their cost
   A politically unstable state is anything but risk-free as it may—being sovereign—cease its payments. Examples of this phenomenon include Spain in the 16th and 17th centuries, which nullified its government debt seven times during a century, and revolutionary Russia of 1917 which refused to accept the responsibility for Imperial Russia's foreign debt. Another political risk is caused by external threats. It is mostly uncommon for invaders to accept responsibility for the national debt of the annexed state or that of an organization it considered as rebels. For example, all borrowings by the Confederate States of America were left unpaid after the American Civil War. On the other hand, in the modern era, the transition from dictatorship and illegitimate governments to democracy does not automatically free the country of the debt contracted by the former government. Today's highly developed global credit markets would be less likely to lend to a country that negated its previous debt, or might require punishing levels of interest rates that would be unacceptable to the borrower.
   A creditor is a party (e.g. person, organization, company, or government) that has a claim on the services of a second party. It is a person or institution to whom money is owed.
  
  Section::::Debt process.:Institutional creditors.:International Monetary Fund (IMF).
  
  Since its establishment in 1947, the IMF has been the primary institution responsible for the maintenance of a smoothly operating international monetary system.
   Section::::Africa.:Debt-trap Diplomacy and Africa’s Economy.:Economic Perils.
   A BoP crisis, also called a "currency crisis", occurs when a nation is unable to pay for essential imports or service its external debt repayments. Typically, this is accompanied by a rapid decline in the value of the affected nation's currency. Crises are generally preceded by large capital inflows, which are associated at first with rapid economic growth. However a point is reached where overseas investors become concerned about the level of debt their inbound capital is generating, and decide to pull out their funds. The resulting outbound capital flows are associated with a rapid drop in the value of the affected nation's currency. This causes issues for firms of the affected nation who have received the inbound investments and loans, as the revenue of those firms is typically mostly derived domestically but their debts are often denominated in a reserve currency. Once the nation's government has exhausted its foreign reserves trying to support the value of the domestic currency, its policy options are very limited. It can raise its interest rates to try to prevent further declines in the value of its currency, but while this can help those with debts denominated in foreign currencies, it generally further depresses the local economy.
   BULLET::::- It was reported in late 2018 that the Zambian government is in talks with China that may result in the total surrender of the state electricity company ZESCO as a form of debt repayment since the country has defaulted on plethora of Chinese loans for Zambia's infrastructure projects.
  
  Section::::Africa.
  
  Section::::Africa.:Debt-trap Diplomacy and Africa’s Economy.
  
presuppositions: A country could make its own money to resolve its debt. Countries can deal with debt by making more money.
corrections: Printing more money causes inflation, and some debts are in foreign currencies. Countries can't make more money due to inflation, foreign currencies, or not having the ability to.
raw_presuppositions: A country could make its own money to resolve its debt. Countries can deal with debt by making more money.
raw_corrections: Printing more money causes inflation, and some debts are in foreign currencies. Countries can't make more money due to inflation, foreign currencies, or not having the ability to.