Foreign lenders are often reluctant to make loans to an emerging market country that are denominated in the country's own currency because
A) of the high risk of default
B) emerging markets suffer from debt intolerance
C) the currency might appreciate before the loan is repaid
D) the banking sector in emerging markets is often underdeveloped
E) the country might print money to repay the debt

Question

Quizplus · Accepted Answer

Foreign lenders are often reluctant to make loans denominated in the borrower's currency because of the risk that the currency might appreciate, making the repayment more expensive in terms of the lender's own currency. This risk is particularly acute in emerging markets, where exchange rates can be volatile.

Foreign Lenders Are Often Reluctant to Make Loans to an Emerging