1. Depletion of Foreign Exchange Reserves: A high current account deficit means that the country is importing more than it is exporting. This leads to more foreign currency going out than coming in, which can deplete the country's foreign exchange reserves. This can lead to a crisis if the country does not have enough foreign currency to pay for its imports or service its external debt.

2. Depreciation of Domestic Currency: A persistent current account deficit can lead to depreciation of the domestic currency. This is because the demand for foreign currency (for imports) exceeds its supply (from exports), which can cause the value of the domestic currency to fall. This can lead to inflation as the cost of imported goods rises.

3. Increased Borrowing and Debt: To finance a current account deficit, a country may need to borrow from other countries or international financial institutions. This can lead to an increase in the country's external debt. If this debt becomes too high, it can lead to a debt crisis, with the country struggling to meet its debt obligations. This can lead to economic instability and potentially a default on the country's debt.

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1. Depletion of Foreign Exchange Reserves: A high current account deficit means that the country is importing more than it is exporting. This leads to more foreign currency going out than coming in, which can deplete the country's foreign exchange reserves. This can lead to a crisis if the country does not have enough foreign currency to pay for its imports or service its external debt.

2. Depreciation of Domestic Currency: A persistent current account deficit can lead to depreciation of the domestic currency. This is because the demand for foreign currency (for imports) exceeds its supply (from exports), which can cause the value of the domestic currency to fall. This can lead to inflation as the cost of imported goods rises.

3. Increased Borrowing and Debt: To finance a current account deficit, a country may need to borrow from other countries or international financial institutions. This can lead to an increase in the country's external debt. If this debt becomes too high, it can lead to a debt crisis, with the country struggling to meet its debt obligations. This can lead to economic instability and potentially a default on the country's debt.

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1. Depletion of Foreign Exchange Reserves: A high current account deficit means that the country is importing more than it is exporting. This leads to more foreign currency going out than coming in, which can deplete the country's foreign exchange reserves. This can lead to a crisis if the country does not have enough foreign currency to pay for its imports or service its external debt.

2. Depreciation of Domestic Currency: A persistent current account deficit can lead to depreciation of the domestic currency. This is because the demand for foreign currency (for imports) exceeds its supply (from exports), which can cause the value of the domestic currency to fall. This can lead to inflation as the cost of imported goods rises.

3. Increased Borrowing and Debt: To finance a current account deficit, a country may need to borrow from other countries or international financial institutions. This can lead to an increase in the country's external debt. If this debt becomes too high, it can lead to a debt crisis, with the country struggling to meet its debt obligations. This can lead to economic instability and potentially a default on the country's debt.

Describe THREE consequences of a persistently high current account deficit

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