Methods of Debt Servicing and Debt Redemption.
The government can use a surplus budget. Also through debt conversion i.e. the ability of a government to borrow low interest cleans for repaying high interest loans. It can do the same through disinvestments. i.e. selling of government owned enterprises to the private sector either a broad or home.
Apart from use of foreign reserves , there is also Debt cancellation i.e. LDCs may appeal to developed countries to write off the debt.
Debt rescheduling. Here the LDCs can negotiate for post- ponement of repayment period.
Use of grants and gifts.
Debts repudiation. A country can totally refuse to pay the debt.
Through taxation. e.g. capital levy to fund the debt.
Use of profits from enterprises that received the loan ( debt).