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Credit involving a national government's ability and obligation to repay debt.
Debt service must be met from revenues, available assets or further borrowing. Large payments due soon can create refinancing pressure even when the total debt stock changes little. Foreign-currency debt adds exchange-rate exposure because domestic tax receipts must be converted. Credit ratings assess aspects of this repayment risk, while broader debt-sustainability analysis examines whether the path of obligations can be maintained.
Suppose a government owes US$100 million next year. At J$150 per US dollar, that corresponds to J$15 billion. At J$165 it corresponds to J$16.5 billion, even though the dollar debt has not increased. This hypothetical illustrates exchange-rate risk; actual debt costs also depend on hedges, foreign-currency receipts, reserves, interest and the government's overall payment schedule.
ECB survey finds easier wholesale credit terms, with financing costs mixed