Every country in the world has external debt in one form or another and to varying degrees. Borrowing is a sound option for any nation, as long as the funds raised are spent wisely.
External debt can cause unease. It has been at the centre of high-profile and serious international financial problems. In the 1980s, there were financial and social crises stoked by debt in Mexico, Brazil, Argentina and several Eastern European countries, including the former Yugoslavia and Romania.
There were difficulties of a bigger magnitude around the 2008 global financial crisis, centred on Greece and Italy but also reaching Spain and Ireland.
But in all these cases, the world’s financial system — skillfully managed by major central banks — was able to absorb and address the problems.
Mena rescue operations
Arab countries are no strangers to borrowing from abroad, via banks, the World Bank, or the International Monetary Fund, to solve their financial and economic problems. Sometimes the level of debt taken on by some nations has risen too high, and Gulf states have stepped in to ease the pressure.
Such rescue operations have helped countries including Egypt, Tunisia, Lebanon, and Sudan. The Gulf states have exempted Egypt and other indebted Arab countries from repaying some debts, and have sometimes rescheduled payments over longer periods.
But this approach can itself be a problem or can lead to more problems later if revised arrangements in debtor nations do not include the kind of economic and financial reform that is needed. Such change can come at a high political cost and can be resisted.
Read more: Saudi loan buys Tunisia's collapsing economy time, but reforms still necessary