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 |
|
|
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. |
Difference between External Debt and Internal Debt
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.