A country is said to be in a debt trap if

A country is said to be in a debt trap if

• It has to abide by the conditionalities imposed by the International Monetary Fund
• It has to borrow to make interest payments on outstanding loans
• It has been refused loans or aid by creditors abroad
• The World Bank charges a very high rate of interest on outstanding as well as new loans

Answer: It has to borrow to make interest payments on outstanding loans

A country is said to be in a debt trap if it has to borrow to make interest payments on outstanding loans

The debt trap is a situation in which a debt is difficult or impossible to repay, typically because high-interest payments prevent repayment of the principal.

Another way to describe debt trap is, a scenario in which a borrower is forced to re-borrow because they can't afford the scheduled payments on the principal of a loan.