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Questions
Distinguish between internal debt and external debt.
Differentiate between internal and external public debt.
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Solution
| Internal Debt | External Debt | |
| 1. | When the government borrows from its citizens, banks, central banks, financial institutions, business houses, etc., within the country. It is known as internal debt. | When the government borrows from foreign governments, foreign banks or institutions, and international organizations like the International Monetary Fund, the World Bank, etc., it is known as external debt. |
| 2. | It is voluntary or compulsory in nature. | It is voluntary in nature. |
| 3. | It involves the use of domestic currency. | It involves the use of foreign currency. |
| 4. | It is less complex for management. | It is more complex for management. |
| 5. | Example: Borrowing from RBI or commercial banks in India. | Example: Loan from the World Bank or Government of Japan. |
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