Introduction In public finance, debt is an important financial tool. Governments use it to finance development activities, infrastructure projects, social services, and budget deficits. Both developed and developing countries use public debt to speed up economic growth. Debt also helps improve living standards. But debt becomes a serious problem in one case. This happens when a government borrows too much. It then loses the ability to repay its obligations through normal income sources. This situation is known as a "Debt Trap." A debt trap is a financial condition. In it, a government must borrow new funds to repay existing debt. This includes both principal and interest payments. In simple terms: a country keeps taking new loans to pay old loans. The debt burden keeps rising. The economy is then trapped in a debt cycle.
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