A threat to call in debt can extract a concession while damaging the creditor relationship. The borrower has an incentive to repay quickly and avoid relying on that lender again. States can seek other countries or institutions for credit, giving them options an individual borrower may lack. Large debts also expose the creditor to the consequences of non-payment. These reciprocal interests make debt diplomacy politically complicated.
Notable Point · 11:16-12:50
Why debt pressure can damage diplomatic influence
Using debt to force a government into agreement can encourage repayment, distrust and a search for other lenders.