it has to abide by the conditionalities imposed by the International Monetary Fund
B
it has to borrow to make interest payments to on outstanding loans
C
it has been refused loans or aid by creditors abroad
D
the World Bank charges a very high rate of interest on outstanding as well as new loans
Correct Answer: Option B
Explanation
1. A debt trap describes a situation where a debtor (individual, organization, or country) is caught in a cycle of borrowing.
2. This cycle typically occurs when existing debts are so large that the debtor cannot afford the interest payments (or principal repayments) from their own income or revenues.
3. Consequently, the debtor has to borrow more money simply to make the required interest payments on outstanding loans (Option B).
4. This new borrowing increases the overall debt, leading to even higher interest payments in the future, thus trapping the debtor in a cycle of ever-increasing debt.
5. Abiding by IMF conditionalities (A), being refused loans (C), or facing high interest rates from the World Bank (D) might be associated with or consequences of severe debt problems, but the core definition of a debt trap is borrowing specifically to service existing debt.