Which term describes the percentage of export earnings used to repay debt?

Which term describes the percentage of export earnings used to repay debt?

• A. Debt Relief
• B. Debt Service Ratio
• C. Why is debt a problem for LICs?
• D. Debt Outstanding

Answer: (B)

Debt service ratio is the proportion of export earnings that must be used to repay debt. It adds up all annual debt service payments (interest plus principal) and compares them to export earnings, giving a percentage. This shows how much of a country’s foreign exchange from exports goes to debt payments. A high ratio means a large share of export income is tied up in servicing debt, which can limit imports, investment, and growth—especially for low‑income countries with limited and volatile export earnings. The other terms refer to different ideas: debt relief reduces what has to be paid; debt outstanding is the total amount still owed; and the question about why debt is a problem for LICs is about consequences rather than a specific metric.

Debt service ratio is the proportion of export earnings that must be used to repay debt. It adds up all annual debt service payments (interest plus principal) and compares them to export earnings, giving a percentage. This shows how much of a country’s foreign exchange from exports goes to debt payments. A high ratio means a large share of export income is tied up in servicing debt, which can limit imports, investment, and growth—especially for low‑income countries with limited and volatile export earnings. The other terms refer to different ideas: debt relief reduces what has to be paid; debt outstanding is the total amount still owed; and the question about why debt is a problem for LICs is about consequences rather than a specific metric.