External debt is the sum of a country’s debts to other foreign entities. It comprises public debt (the state contracts) and private debt (employed by private organisations such as companies and individuals).
Although there is a clear trend in favour of the existence of the external debt, since it allows the country to use its resources while the external resources requested are used, it is generally seen from an opposing point of view since it is assumed that the use of external resources must be efficient.
It is essential to point out at this point that the resources that a country receives with direct payments to the external debt can be used in different ways; one of them is the use of these resources to finance the implementation of other components of strategic and long-term projects and production processes.
What are the primary motivations for the efficient use of external debt?
First, efficiency means achieving the desired effect with the least possible resources or in the shortest possible time. At this point, it is unclear whether efficiency should be based on social or economic measures.
One of the primary motivations for seeking efficiency in the use of external debt is the future improvement of international trade activities.
This would close the cycle of external debt utilisation because if a country achieves efficient utilisation of external debt, this will have a direct effect on innovation, and it will be those innovative states that will ensure a promising future by continuing to finance themselves through international trade, for which they have prepared their entities and organisations.
