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- Difference between External Debt and Internal Debt
- Difference between Private Debt and Public Debt
- Difference between Firm's Debt and Private Debt
- Difference between Internal Audit and External Audit
- Difference between Debt and Equity
- Difference between International Trade and International Business
- Difference between Internal Recruitment and External Recruitment
- Difference between Intrapersonal and Interpersonal Communication
- Difference between Primary Deficit and Fiscal Deficit
- Difference between Fiscal Deficit and Revenue Deficit
- Difference between Internal and External Modem
- Difference between Inline, Internal and External CSS
- Difference between External link and Internal link
- Difference Between Hive Internal and External Tables
- Difference between Internet and Extranet
- Difference between Internal and External fragmentation
- Difference between Intranet and Extranet
- Difference between Internet, Intranet and Extranet
- Difference between Internet and Intranet
- What are the Differences between Internal DTD and External DTD ?
Last Updated : 04 Sep, 2023
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As people and businesses sometimes need to borrow money to pay their expenses, the same goes for the government of any country. The government sometimes may need to borrow money from either inside the country or outside the country. The borrowed money is known as Debt, and the modes of borrowing money can be classified into two categories – External Debt and Internal Debt. External Debt can be defined as money borrowed from outside the country, and Internal Debt can be defined as money borrowed from inside the country.
What is External Debt?
External debt can be defined as the debt borrowed by the government from outside the country. Sources for external debts can include foreign governments, International Monetary Funds (IMF), Foreign Direct Investments (FDI), Foreign Portfolio Investments (FPI), etc. Government is forced to borrow funds from external sources when the internal sources do not have adequate funds to support the operations of the government. External debts are voluntary in nature.
Key Takeaways from External Debts:
- External debts are the debts that the government needs to borrow from external sources to fund its operations.
- Lack of availability of funds from internal sources forces the government to borrow funds from external sources.
- External debts are more complex as they use the concept of foreign currency and the involvement of people outside the country.
What is Internal Debt?
Internal debt can be defined as money borrowed by the government from inside the country. Sources for internal debts can include citizens, the country’s banks, the country’s financial institutions, business houses, etc. Internal debts are voluntary and/or compulsory in nature. Internal debts are mostly used by the government for the betterment of education and health within the country.
Key Takeaways from Internal Debts:
- Internal debts are the debts the government needs to borrow from internal sources to fund its operations.
- Internal debts are less complex as it does not undertake the concept of foreign currency.
Difference between External Debt and Internal Debt
Basis
External Debt
Internal Debt
Meaning External debt can be defined as the debt borrowed by the government from outside the country. Internal debt can be defined as the debt borrowed by the government from inside the country Sources Foreign government, IMF, Foreign banks, or institutions, etc. Citizens, the country’s banks, the country’s financial institutions, business houses, etc. Types - Public and Publicly Gauranteed Debts
- Loan offered by IMF
- Non-Guranteed Private Sector External Debts
- Central Bank Deposits
- Bonds
- Treasury Notes
- Treasury Bills
Nature External debts are voluntary. Internal debts can either be voluntary or compulsory. Complexity External debts are more complex for government. Internal debts are less complex for government. Currency External debts use the concept of foreign currency. Internal debts undertake the concept of domestic currency only. Interest Rates External debts generally consist of low-interest rates. Internal debts consist of higher interest rates. Uses Boosting and recovering economy and/or additional expenses. Betterment of education, health, and other necessary facilities.
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