Distinguish between internal debt and external debt.

Question 16 of 38

Q. Distinguish between internal debt and external debt.

Maharashtra MsbshseMaharashtra HSC (MSBSHSE) Board 2022Subjective· 2mImportance★★★★★

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Internal debt is raised within the country; external debt is raised from abroad and must be repaid in foreign currency.

Public debt is government borrowing, classified by where the loan comes from.

Point	Internal Debt	External Debt
Source	Raised from within the country	Raised from foreign countries or institutions
Lenders	Citizens, commercial banks, RBI, financial institutions	Foreign governments, IMF, World Bank, foreign banks
Currency	Raised and repaid in domestic currency	Involves foreign exchange for both receipt and repayment

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Same / Similar Concept — real previous-year questions on the same or a closely similar concept, not this exact question.

CBSE 2025Set ANNUAL2 marks

Q. Distinguish between internal debt and external debt.

›Reveal solution

Internal debt is borrowed from within the country in home currency, so repayment only redistributes money inside the nation; external debt is borrowed from abroad in foreign currency, so repayment sends real resources out of the country.

Distinction between Internal Debt and External Debt

Basis	Internal Debt	External Debt
Source of borrowing	Raised from within the country (public, banks, RBI, institutions)	Raised from outside the country (foreign governments, IMF, World Bank, foreign lenders)
Currency	Borrowed and repaid in domestic currency	Borrowed and usually repaid in foreign currency
Effect on national resources	Mere internal transfer; total resources of the nation are unchanged	Brings in extra resources initially, but repayment causes an outflow of resources

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CBSE 2024Set ANNUAL2 marks

Q. Distinguish between internal debt and external debt.

›Reveal solution

Public debt is classified by its source into internal debt (raised at home) and external debt (raised from abroad); they differ in the lenders, the currency and the burden on the economy.

Basis	Internal Debt	External Debt
Source	Raised within the country — public, banks, financial institutions, RBI	Raised from outside — foreign governments, IMF, World Bank, foreign investors
Currency	Raised and repaid in domestic currency	Usually raised and repaid in foreign currency
Movement of resources	No net inflow; only a transfer among residents of the same country	Brings a real inflow of resources from abroad initially
Burden	Repayment stays within the country	Repayment causes an outflow of resources to other countries

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CBSE 2022Set ANNUAL2 marks

Q. Distinguish between internal debt and external debt.

›Reveal solution

Internal debt is raised within the country; external debt is raised from abroad and must be repaid in foreign currency.

Public debt is government borrowing, classified by where the loan comes from.

Point	Internal Debt	External Debt
Source	Raised from within the country	Raised from foreign countries or institutions
Lenders	Citizens, commercial banks, RBI, financial institutions	Foreign governments, IMF, World Bank, foreign banks
Currency	Raised and repaid in domestic currency	Involves foreign exchange for both receipt and repayment

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Q.Distinguish between internal debt and external debt.

Concept understanding — Public Debt

Q.Distinguish between internal debt and external debt.

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