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Public debts:internal borrowing and external borrowing

Answer Text:
Public debts:
Sources of public (national debt):
a. Internal borrowing:
This refers to borrowing by government from firms and individuals within the country. This may be done through:
Open market operation; the government sells its securities such as treasury bonds and treasury bills. This however has a
disadvantage of causing, crowding out effect where the government leaves the private investors with little to borrow from.
b. External borrowing
This refers to government borrowing from external sources. It may either be on a bilateral or multilateral basis.
Bilateral borrowing is where the government
borrows directly from another country.
Multilateral borrowing is where the government borrows from international financial institutions such as international monetary fund (IMF), World Bank, African Development bank e.t.c.such bodies get finances from various sources which they lend to their member countries who are in need of such funds.
Generally, external borrowing has strings attached. The borrowing country is expected to meet some set conditions, sometimes adversely affecting some sectors of the economy.
The total internal borrowing (internal debt) added to the total external borrowing (external debt)
constitutes the national debt.