A country is said to be in debt trap if
- Ait has to abide by the conditionalities imposed by the International Monetary Fund
- Bit has to borrow to make interest payments to on outstanding loansCorrect
- Cit has been refused loans or aid by creditors abroad
- Dthe World Bank charges a very high rate of interest on outstanding as well as new loans
Explanation
The correct option is B because a debt trap occurs when a countrys debt levels become so high that its current revenue is insufficient to cover even the interest payments on existing loans. To prevent default, the country is forced to borrow more money just to pay off the interest, rather than the principal amount. This creates a vicious cycle where the total debt continues to grow indefinitely, making it nearly impossible to escape the repayment burden. This situation is the fundamental definition of being trapped in debt.
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