Question

Why was the central government unable to pay its debts to foreign countries?

Answer 1

Answer:When a company fails to repay its debt, creditors file bankruptcy in the court of that country. The court then presides over the matter, and usually, the assets of the company are liquidated to pay off the creditors. However, when a country defaults, the lenders do not have any international court to go to.Sovereign debt is a promise by a government to pay those who lend it money. It is the value of bonds issued by that country's government. Investors have to consider the government's stability, how the government plans to repay the debt, and the possibility of the country going into default.1  Foreign governments hold about a third of the public debt, while the rest is owned by U.S. banks and investors, the Federal Reserve, state and local governments, mutual funds, and pensions funds, insurance companies, and savings bonds.