borrowing

borrowing Incurring debts to finance spending. This is done by individuals, firms, and governments. Borrowing can appear desirable when the benefits from using borrowed money are greater than the interest costs. This may be because of urgent need for individual spending or sudden falls in income, or favourable investment opportunities for firms. Incautious use of credit is liable to cause borrowers severe difficulties when repayments fall due. Similarly, governments borrow when their desire to spend outruns their ability to tax; too much of this causes debt service to become burdensome. Countries borrow when they want to invest more than they save. This may be sensible if investment is very productive, but too much borrowing leads to balance-of-payments problems. See also foreign currency-denominated borrowing.