SOVEREIGN DEBT

The amount to public and national debts that a country has with its creditors.

Just like businesses, countries often have to finance their investments; however they should control their debt levels so as to find equilibrium between achieving their goals and the amount of debt a country can take on now and in the future. This depends in its income, its needs and, of course, the cumulative interest that is owed. To finance their investments (without using their income), a government can decide to sell sovereign bonds, or what would be a future obligation to return the principal with interest to the investor for having contributed to the financing of the country´s activities.