Economic Growth and Stability trough International Loan Facility: A Study on Current Souvereign Financing Practices

Abstract

This study investigates the role of international loan facilities in supporting economic growth and maintaining financial stability, particularly in developing and emerging markets. Sovereign loans are critical for funding infrastructure projects and social programs, but they also carry significant risks, including unsustainable debt levels and heightened vulnerability to global economic fluctuations. The research seeks to understand how international loan practices influence sovereign debt sustainability and economic stability, focusing on strategies for effective debt management. The primary research question explores how sovereign debt practices can be improved to promote long-term financial stability and economic growth. Using a qualitative methodology, the study involved an extensive literature review and analysis of sovereign debt data, examining factors such as loan terms, debt management strategies, and the economic impact of international borrowing. The findings highlight that while international loans can stimulate growth, they often lead to fiscal strain if not managed properly, resulting in dependency and the risk of default. The study recommends comprehensive risk management strategies, diversification of financing sources, and renegotiation of loan terms to align borrowing with long-term development goals. These practices are essential for maintaining financial stability and fostering sustainable economic growth, especially in countries with fragile economies.