A significant depreciation of the local currency relative to a foreign currency in which a debt obligation is denominated will impair a national government's ability to satisfy such obligation.

Question

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If a government owes debt in a foreign currency and the local currency depreciates significantly, then it will require more local currency to repay the debt. This can increase the burden of the debt and may impair the government's ability to satisfy the obligation.

A Significant Depreciation of the Local Currency Relative to a Foreign