Definition of Sovereign default:
The failure of a country to fulfill its financial obligations. Since countries are not subject to bankruptcy laws, they can escape liability without any legal penalties. However, sovereign defaults are rare since it will be more expensive to borrow funds after a default. One of the causes of a default is economic crisis.
Sovereign default is a failure by a government in repayment of its country's debts. Countries are typically hesitant to default on their national debts, since doing so will make borrowing funds in the future difficult and more expensive. However, sovereign countries are not subject to normal bankruptcy laws and have the potential to escape responsibility for debts, often without legal consequences.
Nations who maintain their own currency and whose debt is denominated in that currency will have the option to implicitly default by inflating their currency via printing more money to cover the outstanding portion.
How to use Sovereign default in a sentence?
- Sovereigns who borrow in terms of their own currency may have the option of printing more money and "inflating" their way out of debt.
- Sovereign default may result in a government facing higher interest rates and a lower credit rating among lenders, making it more difficult to borrow.
- Sovereign default is just like a default on debt by a private individual or business, but by a national government that fails to repay its interest or principal due.
Meaning of Sovereign default & Sovereign default Definition