Solvency crisis.
A solvency crisis is a situation in which a debtor-borrowing country or region is unable to repay the principal and interest of its debt on time. It is a form of financial crisis and is usually associated with the size of a borrowing country's or region's debt exceeding its solvency. A solvency crisis can lead to consequences such as debt defaults, debt restructuring or debt moratoriums, which can have serious implications for the economic and financial systems of the borrowing country or region.
In a solvency crisis, the borrowing country or region may face problems such as a shortage of funds, insufficient foreign exchange reserves, and economic recession, resulting in the inability to repay debts on time. This can be due to structural problems in the economy, poor fiscal policy, external shocks, or other factors. The severity of a solvency crisis depends on the solvency of the borrowing country or region and the market's assessment of its credit risk.
For example, Evergrande's recent debt problems can be seen as a solvency crisis. Due to poor management and high turnover, Evergrande faced insolvency and was unable to repay its debts on time, resulting in creditors being unable to fully pay their debts. Such a solvency crisis can lead to work stoppages, reduced incomes, and a housing delivery crisis.
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