Foreign debt is an outstanding loan or set of loans that one country owes to another country or institutions within that country. Foreign debt also includes obligations to international organizations such as the World Bank, Asian Development Bank or Inter-American Development Bank. Total foreign debt can be a combination of short-term and long-term liabilities. Also known as external debt, these outside obligations can be carried by governments, corporations or private households of a country.

BREAKING DOWN ‘Foreign Debt’

A country may borrow abroad to diversify its currency denominations of debt or because its own country’s debt markets are not deep enough to meet their borrowing needs. In the case of third-world countries, borrowing from international organizations like the World Bank is an essential option, as they can provide attractive lending rates and flexible repayment schedules. The World Bank, in conjunction with the International Monetary Fund (IMF) and Bank for International Settlements (BIS), gathers short-term foreign debt data from the Quarterly External Debt Statistics (QEDS) database. Long-term external debt data compilation is also collectively accomplished by the World Bank, individual countries that carry foreign debt, and multilateral banks and official lending agencies in major creditor countries.

In this article