In international trade, default is failure to meet the legal obligations (or conditions) of a loan. A national sovereign default is the failure or refusal of a government to repay its national debt. Default can be of two types:

  • Debt services default: occurs when the borrower has not made a scheduled payment of interest or principal.
  • Technical default occurs when an affirmative or a negative covenant is violated.

Sovereign borrowers such as nations generally are not subject to bankruptcy courts in their own jurisdiction, and thus may be able to default without legal consequences.

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