El The volume and growth of foreign debt: a constraint to the development of economies such as Colombia’s today?

Abstract

Sometimes, a nation’s revenues are insufficient to cover its expenses. This disparity has driven domestic and foreign debt as a solution to fiscal and budget deficits. As a developing nation, Colombia follows this trend by obtaining loans from the World Bank and the International Monetary Fund and issuing securities. In addition, the lack of adequate fiscal revenues forces the country to request foreign monetary support, arguing that credit encourages investment and economic development. However, it is jarring how Colombia’s growing external debt has hindered its long-term economic transformation, leading its economy into a vicious cycle of indebtedness. To delve deeper into this, this paper analyzes how external debt limits the Colombian economy, impacting investment, the current account, and the national budget.