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UPSC 2002: A country is said to be in debt trap if
(a)it has to abide by the conditionalities imposed by the International Monetary Fund
(b)it has to borrow to make interest payments on outstanding loans
(c)it has been refused loans or aid by creditors abroad
(d)the World Bank charges a very high rate of interest on outstanding as well as new loans
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Not attemptedCorrect Answer: (b) it has to borrow to make interest payments on outstanding loans
A country is commonly said to be in a ‘debt trap’ when it must borrow afresh merely to meet interest obligations on outstanding external debt, causing its debt stock to spiral and undermining sustainability ([imf.org](https://www.imf.org/en/news/articles/2015/09/28/04/53/sp121002?utm_source=openai)). Option (b) captures this situation, whereas the other options describe unrelated IMF conditionality, refusal of loans, or high World-Bank rates.
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Frequently Asked Questions
What is the correct answer to this UPSC 2002 Indian Economy question?▼
The correct answer is option (b): it has to borrow to make interest payments on outstanding loans. Watch the detailed video explanation in our Sherlocking Prelims course on UnlockIAS.
Which year was this External Sector & Balance Of Payments question asked in UPSC Prelims?▼
This question was asked in UPSC CSE Prelims 2002, GS Paper 1, as Question 133. It falls under Indian Economy > External Sector & Balance Of Payments.
What is the difficulty level of this UPSC question?▼
This question is rated "easy". It tests basic recall and most well-prepared aspirants should answer it correctly.
How many UPSC Prelims questions have been asked from External Sector & Balance Of Payments?▼
UPSC has asked 49 questions from External Sector & Balance Of Payments (under Indian Economy) across multiple years. Visit the topic page to see the full list and year-wise trends.