When countries have insufficient resources, they may resort to internal and external
borrowing to achieve certain goals (financing public expenditures, preventing inflation, etc.).
Developing countries, in particular, have deficiencies in terms of possessing resources that
will enable them to achieve economic growth in respect of increasing their production and
income. Both financing deficits in public sector and deficits in balance of payments push
countries to external borrowing. Countries may turn towards taxation, coinage or internal and
external debt in order to finance public expenditures. Coinage is not usually preferred due to
the fear of causing inflation. Instead, countries become indebted through treasury bills,
government bonds or external credits. Internal borrowing has rather an inland financial
transfer characteristic. External borrowing, on the other hand, is a form of borrowing that
involves becoming indebted to foreign governments or financial institutions in order to
provide additional resources.