War debt
Nature
Governments may borrow funds from one another in order to finance their engagement in major wars; (war debt usually excludes the debts between defeated nations which are seldom, if ever, honoured, and also excludes obligations imposed by the victors on the vanquished in the form of reparations for war damages). The cost of servicing and repaying such debts once the war is over may give rise to international friction, particularly when some of the victor nations have difficulty in reconstructing their own economies.
Background
Major war debts arose from the two World Wars. The gross total of inter-Allied loans extended during World War I amounted to approximately $20,780 million. As of 1962, the total indebtedness to the USA, for example, was still $19,727 million. As a result of this experience and the difficulties to which it gave rise in the inter-war period, the intergovernmental loans extended during World War II were relatively small. Commonwealth countries accumulated claims on the UK amounting to approximately $3,500 million; the USA extended credits to various countries amounting to $1,100 million. Other assistance was provided in the form of lend-lease aid, totalling $47,865 million.
Type
(D) Detailed problems