Can the government of a country print money to repay an outstanding loan?

[Bookwormlux]

It is not uncommon to see a lot of countries that are struggling seeing to it that they take loans from other successful countries who are willing to support them .

This is usually based on an agreement and the amount of money would be repaid whenever they stated time is due for the money to be paid back .

The problem is that, there are a lot of poor countries that have been taking loans from different countries , and it could take them a generation before being able to repay everything that they're collecting from other countries .

This is especially common in countries that are known for gross level of corruption . Whereby the leaders of this country usually do not spend the money obtained on infrastructural development, but use the money for their own personal and selfish needs .

I am thinking if it is going to be possible for countries that have found themselves in this type of situation to ever get out of the situation , by making sure they print out money and then use it to repay those countries that they are owing .

Is this something that could be considered illegal?

Do you think there is anything wrong in this at all ?

 

[Jasz]

In theory, the government of a country could simply print more money to repay an outstanding loan. In practice, this is rarely done due to the negative impact it would have on the economy.

If the government were to print more money, the value of that money would go down. This means that inflation would go up. As a result, people would be less likely to purchase goods and services (or borrow money) because the value of their assets would decline as prices rose. This would mean that an increase in taxes would be needed (because people can't pay for things). A decline in demand for products and services, along with higher taxes, leads to a decline in jobs.

Additionally, any debts with fixed interest rates (such as student loans or home mortgages) become harder to repay when inflation increases at a faster rate than the interest rate on your debt.

However, Every country has its own monetary policy and central bank that determines how the nation will print and distribute currency. The monetary policy of the government is a reflection of the nation's economy and current economic concerns. When the central bank prints more money, it increases supply; in economic terms, this is called inflation.

 

[Mika]

The government borrows money from multiple sources, from the public, from the local businesses and companies, from local banks. Sometimes one government agency also borrows from another government agency (for example, a road department can borrow money from the finance department). These are internal loans, which means the government has mainly borrowed from the companies and organizations within the country as well as from its own people. However, internal loans consist of a very small percentage of the government's borrowing. The government mainly borrows from other countries, international agencies, foreign companies, etc. For example, Sri Lanka has borrowed a lot of money from the Chinese government as well as Chinese companies. Recently, Sri Lanka has asked for a loan from the Indian Government. India on the other hand borrows from international agencies like World Bank, Asian Development Bank, etc. When the government pays back the international loan, it will have to pay in USD. Government cannot simply print a lot of currency notes and pay back the international loan, the government needs USD to pay back loan. Furthermore, when the government prints a lot of money, the value of money will depreciate, the purchasing power parity will decrease, inflation will increase.

 

[Sotherefore]

This is one of the most asked question in forums and other online communities have been able to come across . well it is possible for the government of any country to print money and pay outstanding debt but we have to know and put so many things into consideration when doing this.

The world economy do not work like that and if a particular country has to print money and pay outstanding debt , it will lead to a very high rate of inflation in the country because normally to have a strong economy in your country you are not expected to buy dollars, but you are expected to earn dollars and that is how the economy of a particular country's grows..

Buying of Dollars will make the value of your currency to drop , that is why every countries are always trying to produce raw materials for exportation .