What are the reason for debt trap? ?
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The worrying part is that the government is now having to borrow to repay the loans that mature, rolling over the existing loans, thus ensuring that the total liability does not reduce at all. The government is also taking on additional loans to service the interest cost, creating a classic debt trap.
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Debt trap is a situation where the debtor will not be able to repay the debt incurred. Debt trap situation may arise due to the higher interest rates or change in terms and conditions of debt incurred. Normally, debt trap will result in default of payments or bankruptcies.
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