2002 General Studies, all questions
UPSC Prelims 2002 · General Studies
Question 133: Economy and Social Development
A country is said to be in debt trap if
ait has to abide by the conditionalities imposed by the International Monetary Fund
bit has to borrow to make interest payments on outstanding loans
cit has been refused loans or aid by creditors abroad
dthe World Bank charges a very high rate of interest on outstanding as well as new loans
AnswerThe answer is (b).
A country is in a debt trap when it has to borrow afresh just to pay the interest on its outstanding loans, so its debt keeps growing on itself. IMF conditions, refusal of loans or a high World Bank rate may be burdens, but none of them is the definition.
Why each option is right or wrong
- (a) IMF conditions are a policy burden, not a debt trap.
- (b) Right: borrowing to make interest payments on outstanding loans.
- (c) Being refused loans is credit rationing, not a debt trap.
- (d) High interest rates add to the burden but are not the definition.
Explanation: written by UPSC Grade, not by UPSC.
Source: UPSC, Civil Services (Preliminary) Examination 2002, General Studies. UPSC's own paper isn't online; the words are from a published compilation. The paper on upsc.gov.in.