The risk that many borrowers in a particular country fail to repay their loans as a result of a recession in that country relates to

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Sovereign risk refers to the possibility of a government becoming unable or unwilling to meet its debt obligations. In this case, the risk arises from the potential for a recession in the country leading to a higher number of loan defaults, which may in turn impact the ability of the government to repay its own debts.

The Risk That Many Borrowers in a Particular Country Fail