What happens if a country goes bankrupt 2023 In the news, there are news that Sri Lanka will go bankrupt. Most people say that Pakistan will go bankrupt soon. But how can a country declare itself bankrupt. How is the situation in the country after declaring bankruptcy?
If a normal person fails to pay the bank loan, his assets are confiscated. Or they try to get your money through a recovery agent. Getting money through recovery agent is not legal but banks use it. But what happens to those countries in the situation that a country could not repay the loan taken from another country?
In that case, does one country attack another country? Enslave the people of that country? Or the money of the loaned country is lost forever? We are going to get detailed information about all these things today. How does a country go bankrupt in this article? After that, how is the condition of that country?
Any person, organization, or country that fails to repay borrowed money. In this situation the individual as well as the organization or the country is declared bankrupt.
If a company declares itself bankrupt, according to the law, the money is recovered by selling the assets of that person, organization or country. In car loan, you must have seen that because the EMI is not paid, the bank or the loan company impounds the car. But the situation of a country is completely different.
Does a country borrow?
What happens if a country goes bankrupt 2023 We need to know this. Most of the countries in the world borrow from other countries or from the IMF for their development. It is worth 10 billion rupees. This money is available in dollars. Example Today India’s foreign exchange reserves are around 600 billion.
If India has to repay the loan and if India is short of money, it can withdraw from this foreign currency reserve and repay its loan. If a country’s foreign exchange reserves become empty, then in this condition that country is declared bankrupt. Because that country has no money left to repay the loan.
It cannot buy any goods from other country due to lack of money. In this situation, the condition of that country becomes critical. They also depend on other countries for essentials like food and fuel. You will be surprised to hear but this is a billion rupees loan to countries like Japan, America, India, China.
America has a loan of 28 to 30 trillion dollars. Also India has a debt of 620 billion dollars. Countries like China and Japan have more loans than this.
Because these countries have borrowed 200 to 250 percent of their GDP. Still the name of this country is not in the list of bankrupt countries. Because this amount has been taken as long term kept early. All these countries repay the loan at a certain time every year. Borrowing is not a bad thing.
After taking a loan, it is necessary to use that money properly. And it is important to return it on time. Many times governments take loans in the name of infrastructure but due to corruption the money is not utilized properly.
This makes the country successful in repaying its loans. A country borrows from another country or from the IMF or from its own citizens or even from foreigners.
Hello Government bonds are created. The government pays a fixed rate to the people who buy government bonds and people buy the bonds by trusting the government.
Why did Sri Lanka bankrupt?
What happens if a country goes bankrupt 2023 Sri Lanka has been declared bankrupt due to depletion of foreign reserves. Sri Lanka’s two main professions agriculture and tourism industry have suffered a lot. Apart from this, many times countries become bankrupt due to the negligence of the government.
When the debt of the government of a country keeps increasing continuously, then the value of the currency of that country starts decreasing. For this, the government starts printing more and more notes.
It is a temporary solution. But later this country has to bear a lot of loss. But the country is forced to do so due to the fear of bankrupt. Because their foreign exchange reserves start running out. Apart from this, even when an epidemic like Corona comes, there is a difference in the economic condition of the country.
Inflation has increased in all the countries of the world during the last 2 years. In India too, the rupee has reached its lowest level. Sometimes even when the stock market is down, a situation like bankruptcy arises.
Due to the decrease in tax collection in any year, the government also becomes short of money. Such incidents are quite common. There is no need to worry about it.
To deal with such situations, the government takes the help of loans. Along with this, the production in the country becomes normal quickly. But it is being shown in the media that the country is going to go bankrupt.
The money that is in the government is about to run out. Hearing such news, all the account holders reach the bank to withdraw their money from the bank. But the bank has only 3 or 5 percent money in what.
The rest of the money is disinvested by the bank or given as loan to other companies and people. When people ask for their money back together, there is a shortage of money in the bank. The bank freezes the account. And people can withdraw only a limited amount from their account.
If the country declares itself bankrupt then inflation starts increasing there. Due to limited resources in the country, there is also a shortage in the supply. Rising inflation gradually leads to starvation-like conditions. People are not getting medicine in Sri Lanka.
If a country is unable to repay the loan, then what happens to it?
At the international level, if any country is bankrupt. No one can spoil anything of the country. No hearing will be held regarding this matter. Example Suppose America has given a loan to Brazil. After a time, that country went bankrupt.
America cannot force Brazil to recover its money from that country. America cannot attack that country. America can only ban those countries. Can stop its trade with that country. Other countries of the world also stop trade with the bankrupt country.
That is, the country which has been declared bankrupt will not be able to import any goods. And the promises and words of other countries have to be believed. After bankruptcy, countries often say that they will improve their economy very soon. Will repay all the loan in some time.
At the international level, no country can force another country to take a loan from another country, and neither can another country force the former country to repay the loan. To give or take everything depends on the relationship between the two countries. Some countries give their monkey or land on lease for not giving loan. The one with whom you maintain good relations.