What is foreign debt?

Foreign debt refers to the amount of money that a country's government or private sector owes to foreign creditors, typically in the form of bonds or loans taken out in foreign currencies. The correct answer is the description of debt sold by a foreign borrower but in local currency. This means that even though the borrower is from another country, the debt is denominated in the local currency, making it foreign debt regardless of the currency used for the issuance.

This concept is crucial in international finance as it reflects the country's borrowing from foreign sources and the need to manage currency risks associated with foreign exchange. When a foreign borrower takes on debt in the local currency, it can often manage its obligations without dealing with fluctuations in exchange rates of foreign currencies.

The other options would not accurately capture the essence of foreign debt. For example, debt sold in the currency of the issuer does not qualify as foreign debt since it pertains to borrowing in the same currency where the issuer operates. Government bonds of the issuing country might indicate domestic debt, while private loans given by banks would refer to transactions without the international aspect that is inherent in foreign debt. Understanding these distinctions is necessary for grasping the complexities of global finance.