Economics Exchange Rates Questions
Exchange rates can significantly impact international debt repayment. When a country has borrowed money in a foreign currency, changes in exchange rates can affect the amount of money that needs to be repaid. If the domestic currency depreciates against the foreign currency, it means that more domestic currency will be required to repay the debt. This can increase the burden of debt repayment for the borrowing country. On the other hand, if the domestic currency appreciates against the foreign currency, it means that less domestic currency will be needed to repay the debt, making it easier for the borrowing country to meet its repayment obligations. Therefore, exchange rate fluctuations can have a significant impact on the affordability and sustainability of international debt repayment.